Digital Payment Adoption and Cross-Border Trade Efficiency Among Small and Medium Enterprises in East Africa

Small and medium enterprises (SMEs) drive more than half of global employment, yet in East Africa their cross-border trade is still burdened by slow, opaque and costly settlement processes. This study tests whether adopting digital payment channels—mobile money, online bank transfers and card payments—improves measurable trade-process efficiency for SMEs in Kenya, Uganda, Rwanda and Tanzania. Harmonised World Bank Enterprise Survey microdata for 2023-2025 (n = 2 842 firms) were pooled and analysed using weighted descriptive statistics and multivariable ordinary least squares models with firm-level controls and country fixed effects. SME digital-payment uptake is highest in Kenya (78 %) and lowest in Tanzania (53 %), with exporters consistently exhibiting greater adoption than domestically oriented peers. Adoption is associated with significant reductions in border-process frictions: firms using electronic payments clear customs 1.46 days faster (p = 0.019), incur 2.11 percentage-point lower compliance costs relative to shipment value (p = 0.006) and report lower perceived unpredictability of trade procedures (β = -0.31, p = 0.009). Interaction models show that these efficiency gains are magnified where cross-border payment costs are lower (measured by Remittance Prices Worldwide corridor data) and where Trade Facilitation Agreement implementation is more advanced, underscoring the joint importance of interoperable infrastructure and regulatory alignment. Robustness checks using intensity measures, alternative efficiency proxies and wild-cluster bootstrap inference confirm the stability of results. The findings illuminate digital payments as trade infrastructure rather than mere fintech and imply that regional initiatives such as the EAC Payment System Masterplan and PAPSS under AfCFTA will yield the greatest SME benefits when they simultaneously lower transfer costs and harmonise rules. Policymakers, fintech providers and SME owner-managers should therefore pursue coordinated interventions that convert widespread adoption into tangible cross-border efficiency gains.

Keywords: digital payment adoption, cross-border trade, SMEs, East Africa, trade efficiency, interoperability, regulatory alignment