Fintech is big news this year in Africa, and throughout the world for that matter. Bitcoin, and other crypto currencies have brought the potential of new financial mechanisms to the forefront of those that had never considered changing their financial instruments previously. As people speculate on crypto currencies, and mobile money becomes even more popular across the African continent, there is more of an awareness that simply using cash, or a bank account, is not the only option any more.
With this awareness comes a craving from the market for more solutions to financial problems. We have seen this across many financial instruments. Mobile money has made payments more convenient, brought many new individuals into banking, enabled people to get credit ratings, and even helped people with medical insurance. Micro loans can now be facilitated online, enabling people to develop their small businesses, and people even have new ways of paying for their mini solar grids for the house.
Another big issue, that is yet to be solved fully in Africa is in the remittances sector. The figure seems to very, but around $33 billion in remittances flowed into the continent in 2016. That is a significant amount of many African economies, with 10 countries receiving 3% of their GDP through this method.
The problem is, that it can be time consuming and costly to send money from outside of Africa into Africa, and even within Africa itself. Western Union and Moneygram have, for a long time, cornered the market, but the percentages on payments that they take are relatively enormous! And, the safety of such payments must come into question. Although ID is required to collect money, I have personally seen a Western Union payment being collected with no ID at all. Bank transfers often also have hefty fees placed on them, as well as unfavourable exchange rates. All this makes it difficult and also a waste of money for people to send money back to their families, which common, and even for companies to pay salaries to those working for them in Africa.
But technology is beginning to solve this issue. One of the first to compete with the likes of Western Union and Moneygram, as well as bank transfers was Transferwise. Their clever system means that no money actually travels across borders. A user transfers the money to a local bank account, and a bank account in the destination sends the cashto the bank account of the receiver. This cuts out the costly transaction fees, and leaves the receiver with a larger percentage of the transfer. Sadly, Transferwise is not yet available across Africa, and in my experience, payments to South Africa were not as quick as they could have been.
One service that is trying to make it easier to send money to various countries in Africa is Mukuru. This service enables people in the UK to send money to Kenya, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe. Fees are relatively low, with £10,000 bringing a fee of just £2.49. Which is extraordinarily low! With a quick registration process, including verification of ID which is vitally important for safety, it is possible to quickly transfer funds through to a bank account, a mobile money wallet, or even for cash pick up.
Worldremit are another firm that have jumped into the market in a big way. They are currently more established than Mukuru, and offer quite competitive rates to a huge number of countries. One of the things that makes them standout from the rest is the incredibly quick availability of the funds at the other end. Transfers to banks, and cash are instant, as are airtime and mobile money transfers. The fees for a bank transfer to south Africa are similar to Mukuru at £2.30, with fees for a cash pick up a lot higher at £16.85. (Mukuru’s prices stay the same for cash pickups) It also makes a great difference that their service is available across many different countries and platforms.
There are still some problems to be ironed out. Mobile money seems to be the perfect channel for the future of remittances. But with so many different mobile companies, it is important to be able to somehow create collusion between the different mobile money systems within one wallet. Mobile Money is not so popular in South Africa, and especially not in Europe and America, but if it were to become so, it would make the process a lot easier, and possibly even cheaper. These new innovations are just the start for international money transfers, with many more to bring down the price and make international payments more convenient.
How do you send or receive money in Africa and into Africa? It would be wonderful to hear if you know of any further innovative ways of doing so.
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