Remittances: A Powerful Force for Financial Inclusion

This article is brought to you in partnership with Clear Junction, written by Dima Kats, Founder and CEO, of Clear Junction.

Given how much migration around the world has grown over the past two decades, and combined with technology making money transfers more accessible, remittance corridors, inflows and outflows have undergone significant shifts.

No matter where remittances are sent from and headed to, it’s vital that they are made with security and speed built-in. But many remittance providers are struggling to facilitate fast and cost-effective remittances due to high costs, FX conversion challenges, and logistical hurdles. And sadly, that means many people seeking efficient remittance services have struggled to access and afford them. On the other side are recipient individuals and families who depend on those services – they can’t afford to be faced with delays in receiving funds.

Traditionally, the main option for remittances were money transfer networks like Western Union or the post office. But these transfers are often slow to be processed, and in places where physical infrastructure is sparse, chances are that recipients in home countries need to be paid via non-banking payment rails. However, not all payment networks may be available or accessible in every region, limiting the reach of remittance services.

Another challenge is that many banks are hesitant to work with remittance companies due to the perceived higher risk associated with money transfer businesses, which leads to account closures or limited access to banking services.

High transaction costs, including fees associated with currency conversion, international transfers, and intermediary banks, can also eat into remittance profit margins. Finding cost-effective payment solutions that offer competitive exchange rates and low fees is a constant challenge. This means many remittances remain cash-based and therefore more prone to fast-changing FX conversion rates eating into remittance balances and provider profitability.

Fluctuations in exchange rates can impact the profitability of remittance companies, especially those operating in multiple currencies. Remittance companies need access to services with the best FX rates on the most commonly used currencies like USD, EUR or GBP in order to give the best value to their customers.

On top of all of that, employing secure and proven technology is of paramount importance, as is the knowledge that when funds are sent, they will appear in the recipient’s account in as little as a few minutes.

That’s why Clear Junction’s platform is designed to minimise the operational and financial challenges of scaling up remittance FinTechs. We understand the difficulties faced by remittance companies in establishing accounts. So, our collection accounts enable remittance companies to hold a monetary balance with Clear Junction, enabling them to gain access to domestic and international payment networks across the UK, Europe, and US and benefit from competitive FX rates when conversion is needed.

Clear Junction provide a transparent fee structure, which gives remittance companies full visibility of the costs that they will incur on making cross-border payments – unlike some traditional methods when you do not understand the fees until the transaction has been received.

With remittances worth billions of EUR and GBP flowing through our pipes, we’re trusted by a wide range of players to provide reliable technical infrastructure, fast transaction routing, and low FX rates that enable people to send money home, to where it’s needed most – at the fingertips of recipients.

What’s more, Clear Junction can help remittance companies extend their reach outside their domestic markets, enabling them to access and build strong relationships with counterparties in various geographies. Our existing clients operate as a network and often times we are pleased to see internal settlements within that network.

Amongst the advantages offered by Clear Junction is the upcoming roll out of cross-border settlements using stablecoins. Using blockchain and pegged to a reserve asset like US dollars, stablecoins offer real-time settlement and remove the intermediaries that add to fees and risks. Stablecoins hold the potential to fundamentally transform remittance flows to underserved and emerging markets, empowering more financial inclusion and economic development, at societal and global levels.

With Clear Junction, you’re guaranteed clear advantages in your remittance offerings: reduced transaction costs, faster and more secure remittance flows, and the power to reach more customers. Get in touch with us at https://clearjunction.com/contact/ if you’d like to find out how we can help your business.

Meet Clear Junction at IPR Global 2024!

Joining as Platinum sponsors, you can meet Clear Junction at our annual IPR Global event, where you can dive into deep conversations, explore potential partnerships, and discover the latest trends in the industry from leading influencers.

The top decision-makers will be there, so don’t miss this golden opportunity. Our spaces are limited, so seize your ticket now before it runs out at: https://global2024.ipr-events.com/

We look forward to seeing you!

Attijariwafa Bank Group adopts RemitONE’s platform, enhancing its money transfer offering

June 2024: Attijariwafa Bank, a leading banking and financial group, is enhancing its money transfer offering by adopting RemitONE’s Money Transfer System. Their objective was to secure a robust, compliant, and highly secure online money transfer platform that could seamlessly integrate with third-party delivery networks across their expansive pan-African network. This decision aimed to ensure the strict enforcement of compliance procedures while sustaining rapid growth, ultimately delivering a dependable platform for their customers to securely transfer money online and in-person at their offices.

Ranked as the largest bank in Morocco and among the top five in Africa, Attijariwafa Bank Group has made RemitONE its preferred money transfer platform provider. This strategic move reinforces their position as the leading player in the banking and financial sectors within these regions. Known for their dynamism and innovation, Attijariwafa Bank Group has diversified its business operations and expertise to cater to the needs of all individuals, regardless of their social status or background.

Mr Oussama Kseibati, Head of Sales, commented, “RemitONE is proud to be partnering with Attijariwaffa Bank, to assist in their digital transformation. Attijariwaffa have chosen RemitONE as a white label end-to-end system provider, to increase reach to customers while providing a fast, reliable and user-friendly experience. We are excited to be working with this leading bank and look forward to a long-lasting prosperous relationship”.

Learn more at attijariwafabank.com and follow them on LinkedIn and Twitter (@AttijariwafaB).

About RemitONE

RemitONE is the leading provider of money transfer software solutions for banks, telcos, and money transfer operators (MTOs) worldwide. Organisations of all sizes use the RemitONE platforms to run their money transfer operations with ease and efficiency by reaching out to their customers via multiple channels including agent, online and mobile.

For more information on RemitONE, please email sales@remitone.com

Dahabshiil UK Partners with RemitONE to Revolutionise Money Transfers in Africa with Cutting-Edge Digital Solutions

July 2024: Dahabshiil UK, part of the international Dahabshiil brand, is a leading Money Service Business (MSB) specialising in cross-border money transfer services from the UK to Somalia, Somaliland, other parts of Africa and other continents around the world.

Dahabshiil UK and RemitONE have announced a strategic partnership to realise business growth. This collaboration allows Dahabshiil UK to utilise the RemitONE software’s powerful compliance features and mobile app technology to support their transition from their current brick-and-mortar model to a digital one.

Dahabshiil UK will work with supply-chain members – including payment gateways, IDV providers, Open Banking partners, SMS gateways and money transfer operators – that are part of the vast RemitONE Ecosystem™. RemitONE will, in turn, enhance its growing ecosystem by onboarding Dahabshiil UK’s network of send and payout agents.

Lamin Bojang, CEO, Dahabshiil UK: “We are thrilled to partner with RemitONE in this digital transformation journey. This collaboration represents a significant milestone in our mission to provide fast, secure, and affordable money transfer services to our customers globally. Leveraging RemitONE’s advanced technology will enable us to expand our reach and improve the efficiency of our operations, ultimately benefiting our customers by offering them more convenience and better service.”

Aamer Abedi, Chief Marketing Officer at RemitONE: “We are very excited to be working with Dahabshiil UK. We see this partnership as part of our vision to utilise technology to make money transfers affordable for the unbanked and underbanked. Dahabshiil is one of the biggest and most trusted money transfer operators in Africa and we look forward to working with them to bring the latest money transfer trends to Dahabshiil’s loyal customer base.”

Learn more at dahabshiil.com and follow them on LinkedIn and Twitter (@DahabshiilGroup).

About RemitONE

For more information on RemitONE, please email sales@remitone.com

RemitONE Liveness Feature™ Coming Soon: Real-Time Biometric Authentication for Digital Money Transfers

We are excited to announce the introduction of the RemitONE Liveness Feature™, brought to you through our collaboration with GBG.

The pace of digital transformation has accelerated remarkably in recent years, driven by the rapid advancements in artificial intelligence (AI). This technological surge has reshaped numerous sectors, offering innovative solutions.

In the healthcare sector, the UK’s National Health Service (NHS) integrated AI-driven facial biometric checks into their mobile app to simplify login procedures, minimising the need for in-person visits and accelerating the onboarding process. Similarly, airlines like Emirates and Delta have also adopted biometric facial recognition for check-in, security clearance, and boarding, streamlining processes and reducing physical contact. These innovations highlight AI’s transformative power in reshaping industries and improving operations.

At RemitONE, we have responded swiftly by introducing the RemitONE Liveness Feature™, to help your business comply with the Payments Services Regulations (PSR). These regulations require strong customer authentication for security, and our new Liveness feature ensures that you meet these standards.

What is the RemitONE Liveness feature™?

The RemitONE Liveness feature™ is an innovative tool that uses advanced biometric facial recognition technology for real-time authentication during customer onboarding when the customer is not physically present.

This technology includes liveness testing, which alongside facial biometrics, detects fraudulent attempts such as deepfake images or silicone masks used during selfie submissions. This ensures that the submitted biometric data originates from a genuine person who is physically present. By integrating this feature into your customer onboarding process, you can mitigate the risk of financial penalties and protect your company’s reputation.

Stay tuned for when this feature will go live. Follow us on LinkedIn and Twitter or subscribe to our newsletter for the latest updates.

Interview with Sid Gautam, Senior Vice President, Flutterwave | IPR Global 2023

We sat down with Sid Gautam from Flutterwave during our IPR Global event, to find out the key challenges and current state of Open Banking and payment processing in Africa, along with the benefits of attending the IPR Global event.

Sid specialises in embedded finance and cross-border payments within CeFi and DeFi domains. Over the years, Sid has managed to grow early-stage and growth businesses to realise their full potential across EMEA and APAC. His area of expertise includes new business development across the length and breadth of the enterprise organisations, alliances, defining go-to-market strategies as well as leading and scaling high-performance business development teams across geographies with a customer-centric approach.

Watch the interview for his expert insights.

Interview with Lindsay Lehr, Managing Director, PCMI | IPR Global 2023

We interviewed Lindsay Lehr from PCMI during our Innovation in Payments and Remittances (IPR) Global event, to share her thoughts on the transformative technologies shaping the global payments market, how Money Transfer Operator’s (MTOs) roles will shift in the coming years, what sets the IPR event apart, and more.

Lindsay is a renowned thought leader in the payments space, advising the world’s most exciting companies including card networks, global marketplaces and payment platforms. Since 2012, Lindsay has managed over 400 client engagements in the payments industry and grew her team of one to today over 50 consultants based across the US, Latin America, Europe, Asia, and South Africa.

Watch the full video to find out her insights.

RemitONE Appoints DTCC as Channel Partner to Bring IPR Events to Saudi Arabia

RemitONE is thrilled to announce our partnership with Digital Technology City for Communication and Information Technology Company (DTCC) to bring Innovation in Payments and Remittances (IPR) Events to the Payments industry in Saudi Arabia.

RemitONE Launched IPR Events in 2018 to bring together payment and remittance professionals to exchange best practices, cultivate profitable partnerships, and drive positive change in the industry through events, training, and research.

Today, IPR is a trusted brand in the global payments space, organising many online, in-person, and hybrid events focusing on FinTech, RegTech, Cross-border Payments, and Remittances, with a special emphasis on technology.

RemitONE and DTCC are proud to be working together to bring a range of modern events – including Training sessions led by industry leaders – to the Saudi Arabian ecosystem of payments professionals.

IPR Saudi Arabia will help facilitate knowledge sharing and network expansion among international and domestic Payments industry professionals in Saudi Arabia.

Based in Saudi Arabia, DTCC, a renowned leader in technology-driven solutions, is dedicated to innovation and efficiency under the leadership of their CEO Mr. Anwar Al Murshed. Bringing a wealth of expertise to the table, Mr. Al Murshed drives impactful strategies to enhance operations and deliver exceptional results.

Saudi Arabia holds a prominent position in the global $22T Cross Border Payments industry.

This robust market, fuelled by rapid innovation, presents vast opportunities for growth and advancement for all supply-chain members.

Commenting on the partnership, Anwar Almurshed, Founder of DTCC, stated, “We are excited to partner with RemitONE to introduce their IPR events to the Saudi market and beyond. By combining DTCC’s local market knowledge and technological capabilities alongside IPR’s expertise, we’ll unite cross-border experts and supply chain members worldwide.”

Aamer Abedi, Chief Marketing Officer, expressed “This is a notable milestone for RemitONE’s IPR brand as we seek to expand our services in the dynamic Saudi Arabian market. We are excited to embark on this journey alongside DTCC whose regional knowledge and Financial sector experience will ensure IPR’s services benefit native businesses. Together, we are confident that our combined expertise will further empower Saudi Arabia’s Fintech and Cross-border payments landscape, advancing digitisation nationwide.”

This collaboration underscores our shared dedication to driving progress and prosperity in Saudi Arabia and beyond. With a strong focus on providing exceptional value and nurturing long-term partnerships, we are excited to enhance the future of payments and remittances.

To never miss an update, follow us on LinkedIn here.

For more information on DTCC, RemitONE or IPR Events, please email marketing@remitone.com.

Interview with Wayne Gould, former Head of Financial Services, Trust Payments | IPR Global 2023

We interviewed Wayne Gould, former Head of Financial Services at Trust Payments, during our Innovation in Payments and Remittances (IPR) Global event. Discover his insights on the event, including how it has facilitated the formation of new connections, strengthened existing ones, and more.

Watch the short interview now!

Saudi Arabia and the GCC: How to Tap into one of the World’s Biggest Payments Markets | IPR Global 2023

Join us for an enlightening panel discussion where our expert panellists will delve into the dynamic landscape of payment and remittance services within Saudi Arabia and the Gulf Cooperation Council (GCC) region.

Discover the latest market trends, regulatory insights, and technological innovations driving this vibrant sector. Gain valuable knowledge about consumer behaviour, cross-border remittances, financial inclusion initiatives, cybersecurity, sustainability efforts, and prospects.

Moderator:

Ibrahim Muhammad, Payments Consultant, Finxplor

Panellists:

Yasser Fathi Alkhouli, Chairman & CEO, Labbaik Global Ltd.
Nadeem Qureshi, CTO, USI Money
Saif Khan, President – EMEA, BILRS

What makes GCC such a significant region for payments and remittances?

The GCC has emerged as a powerhouse in the payments and remittances sector, with a staggering market value of $140 billion, a stark contrast from its valuation of $25 million in the early 2000s. This exponential growth underscores the region’s economic significance. What makes the GCC even more noteworthy is that two of the top three sending markets globally are from within its borders, namely the UAE and Saudi Arabia, as highlighted by Saif. The interconnection between migration and this surge in the payments market cannot be overstated, with approximately 30% of the world’s migrants residing in Gulf countries. This not only explains the current momentum but also points toward the untapped potential for further expansion. Saif’s insights into the UAE market, boasting around 10 million individuals with 9 million being expatriates, of which almost 60% are from Southeast Asian countries, provide a granular understanding of the diverse demographic contributing to the region’s payment dynamics.

Yasser adds another layer to the discussion by emphasising Saudi Arabia as the fastest-growing within the region. As Saudi Arabia strives to achieve its ambitious goals by 2030, the payments and remittances industry is set to play a pivotal role in shaping the economic landscape of the region.

What are the primary challenges and opportunities for businesses looking to enter or expand into key markets like Saudi Arabia and the UAE?

Entering or expanding into key markets like Saudi Arabia and the UAE presents a nuanced landscape of challenges and opportunities. Nadeem sheds light on the unique dynamics within the GCC, highlighting the differences in how countries operate internally despite shared interests like security and religion. He draws attention to the varying compositions of the migrant population, with the UAE boasting a highly skilled workforce (9 out of 10) compared to Saudi Arabia (4 out of 10), where the majority are labour workers.

Saudi Arabia’s policy to promote local employment aligns with its 2030 vision, however, cultural challenges are prevalent in the market, where large corporations grapple with stakeholders who may not easily comprehend intricate industry aspects. This calls for a need for simplification and effective communication strategies to navigate potential misunderstandings. Furthermore, the creation of new cities with unique laws and regulations essentially will form microcosms of countries within the country. This complex setup unveils opportunities within the sector, but it also demands a meticulous investigation into the business proposition.

Yasser points out the evolving nature of the market, where he specifically highlights Saudi Arabia’s ambitious city plans, such as NEOM, presenting a frontier of opportunities and ushering in a new era. With the planned expansion of the capital, Riyadh is to be five times its current size which signals the potential for businesses to establish a presence in these emerging zones. The country’s demographic consists of 75% under 40, whom are well-educated, which highlights the availability of skilled human capital, further enhancing the appeal for businesses seeking to enter or expand in these key markets. In essence, the challenges and opportunities are intricately woven into the unique fabric of each country, requiring a strategic and culturally sensitive approach for successful market entry and expansion.

How has the Saudi youth adapted to the digital landscape?

The youth’s seamless integration into the digital landscape, evident through active participation in conferences and tech exhibitions, has become second nature. This growing digital presence not only parallels the annual surge in new businesses but also cultivates a tech-savvy and readily available workforce. Yasser points out the restrictions the government has implemented on studying abroad, encouraging individuals to pursue their education domestically, to foster academic growth within the country. Notably, Saudi boasts one of the top 30 universities in the UAE, the King Abdullah University of Science and Technology. The ongoing trend of remote work, accelerated by the pandemic, has simultaneously opened new opportunities for Saudi youth to contribute to various industries from the comfort of their homes.

Despite the prevalence of migrants being employed for labour-intensive roles, Yasser points out the presence of global non-Saudi nationals in sectors like tourism. Recognising this diversity is crucial when analysing workforce dynamics in the region.

The mention of the Umrah pilgrimage, a significant event attended by millions of Muslims, brings attention to the unique religious aspects that businesses must consider. Yasser advises companies operating in the region should align their services with the principles of religion, particularly when catering to events like Umrah, where spending decisions are influenced by religious laws.

How can the payments industry contribute to improving financial inclusion in Saudi Arabia and the rest of the GCC, and what initiatives are currently in place?

Nadeem provides valuable insights into how the payments industry can play a pivotal role in enhancing financial inclusion, particularly focusing on Saudi Arabia. Financial inclusion, as he defines it, involves both participation in various transactional aspects and exerting control over the entire transaction process, from initiation to delivery. However, he notes that gaining approval from the Saudi Arabian Monetary Authority (SAMA) is a prerequisite, making entry difficult. He suggests an alternative route, collaboration with companies involved in different stages of the transactional chain.

The remittances sector poses a unique challenge due to the historical dominance of the top four players, often working closely with local partners. Nadeem proposes separating remittances from acquirers, PayFac, and tech providers, then strategically selecting components that foster financial inclusion. Overcoming hurdles for small and medium-sized enterprises (SMEs) is another focus, given the regulatory mandate for banks to engage with other banks. Nadeem suggests navigating this constraint by leveraging aggregators under the remittance umbrella to facilitate relationships and streamline the process.

Regulatory pressures have led to a reduction in the number of Money Transfer Operators (MTOs). The regulations dictate that to maintain their status, MTOs must refrain from establishing new global network relationships, indicating a shift in how remittances are managed, with a greater emphasis on the banking perspective. This contrasts with the situation in the UAE, where exchange houses wield more influence in the remittance landscape.

What are some incentives for Saudi startups in the Fintech landscape?

Yasser echoes Nadeem’s point that there has been a steady increase in new players and heightened competition in recent years. One crucial aspect is the intersection of regulations and payment products, presenting a significant opportunity for Fintech startups. Drawing parallels with the tourism industry’s success in introducing instalment payments, buy now pay later options, vouchers, and loyalty programs, Yasser suggests that similar tactics could be applied to the payments and remittances market. This strategic approach has the potential to boost transactions by 20-30% annually. While the technology is capable of offering these services, there is less utilisation of it in the current market.

To stand out in the competitive landscape, payment companies should incorporate creativity in diversifying their products and services. By tailoring offerings to resonate with the target audience and provide tangible benefits, companies can foster customer loyalty.

How are Fintech companies and startups contributing to the transformation of the payments landscape in the region? Can you share examples of successful innovations?

Saif provides valuable insights into how Fintech companies and startups are driving a transformative shift in the payments landscape of the region, citing significant growth indicators and successful innovations. Notably, he highlights a remarkable increase in fundraising for startups, with a staggering growth rate of 170% from $35 million in June 2023 to $95 million in July 2023. This substantial investment influx signifies the progress and potential of startups in the region, fueled by ambitious leadership visions such as Saudi Arabia’s 2030 plans and the UAE’s 2050 goals, aiming to double population, economy, and resources.

He further draws attention to the evolution of Fintech solutions, noting the regulatory clarity that now exists compared to the past. Previously, launching a prepaid program was challenging, but today, banking-as-a-service models operate under well-defined regulations, with clear licensing and specifications of their roles and responsibilities.

In terms of corporate expenses, Saif highlights a notable shift from traditional payroll methods to more streamlined processes involving gift cards and multi-currency cards. This transformation has made it easier for SMEs to manage their expenses through the implementation of advanced software and tools, eliminating tedious and time-consuming procedures.

The impact of the Wage Protection System (WPS), mandated by the Saudi Arabian Monetary Authority (SAMA) has played a crucial role in bringing many individuals into the banking sector, including the unbanked and underserved populations, thereby expanding financial services to a broader audience. Moreover, the entry of players from the US and UK markets indicates the global interest and recognition of the region’s fintech potential.

How do you see the adaption of AI and Blockchain technologies within the payments sector in the region?

The status of cryptocurrency, specifically Bitcoin, in Saudi Arabia exists in a legal grey area, it’s worth noting that no penalties or fines are imposed for its use currently. Nadeem suggests that the authorities are cautiously monitoring the situation, acknowledging the potential risks but also recognising the need to stay on top of global trends to meet its 2030 visions. While Saudi Arabia has not outright banned cryptocurrencies, it maintains a vigilant stance.

In contrast, blockchain technology is actively utilised in the GCC region, particularly in crypto-friendly locations like Dubai. Settlements, exchanges, and transactions involving Saudi Arabia often take place through facilities provided in neighbouring countries, such as the UAE. This cross-border utilisation showcases the potential of blockchain technology in facilitating seamless transactions within the region.

AI plays a major role in Saudi Arabia’s 2030 vision. The ambitious plan involves extensive implementation of AI technologies, particularly in new city projects that are heavily technology-driven. Biometrics, contactless payments, and various opportunities in the AI landscape are integral components of this forward-looking initiative.

Yasser points out the imminent surpassing of Saudi Arabia’s 2030 Vision within the next two years and the unveiling of the 2040 Vision in 2025. This rapid evolution indicates the country’s openness to new opportunities and its commitment to continually embrace and expand its technological landscape.

What do you foresee as the future trends and opportunities in the payments space in Saudi Arabia and GCC?

Yasser anticipates the transfer of dynamics from the tourism industry to the payments sector, foreseeing a replication of successful models in the years to come. He emphasises the versatility of Saudi Arabia, noting that consumer behaviour can vary between the northern and southern regions. This regional variability necessitates a thoughtful consideration of tailored products and services to cater to specific preferences in different areas.

Saif predicts a substantial growth in payments, with expectations of doubling or even tripling in the coming years. He highlights a significant shift in payment culture, noting the emergence of strong players in the remittance sector that offer a diverse range of services, such as bill payments and travel cards. While there has been a 35% shift to digital platforms, a substantial 60% of transactions still occur in brick-and-mortar stores. Interestingly, comparing this to the US market, people in the UAE are adapting digitally faster.

The role of population growth, driven by expats, startups, and investors also acts as a key factor in shaping the future of the payments landscape. The increasing economic activity and diversity in the population contribute to the expectation of ongoing growth and evolution in the payments sector.

What next?

At RemitONE, our commitment is to provide you with cutting-edge technology, compliance solutions, and expert guidance to navigate the ever-evolving landscape of remittances. Whether you’re just starting out or looking to scale your business, we’ve got you covered.

Want to see how RemitONE can elevate your business? Book a free consultation with our experts today!

Africa Remittances: Traversing the New Frontier | IPR Global 2023

This insightful session will explore the evolving landscape of remittances in Africa, with a key focus on the transformative impact of mobile money services and e-wallets. Our panel of experts will delve into topics like the role of innovative technologies, financial inclusion, regulatory challenges, and the potential to reduce costs and promote economic development through remittances.

Discover how these digital financial tools are reshaping financial ecosystems, empowering underserved communities, and fostering cross-border economic integration across the African continent.

Moderator

Priscilla D´Oliveira Friedman, COO, CrossTech

Panellists:

Temiloluwa Adesina, Senior Product Manager, Flutterwave
Ababacar Seck, Managing Director, Africa, RemitONE & IPR
George Boateng, Chief Operations Manager, Unity Link Financial Services Limited
Reynell Badoe, Head, Everyday Banking, Stanbic Bank Ghana LTD

What is the current landscape of remittances in Africa, and how has it evolved over the past decade?

Across the continent, every country heavily relies on inbound transactions, creating a diverse landscape characterised by various players, services, business models, and remittance types, including traditional, digital, and informal methods. Despite the challenges posed by the COVID-19 pandemic, the remittance market in Africa has proven to be remarkably dynamic and resilient, defying expectations of a decline in transactions. Comparing the present situation to the early 2000s, Ababacar highlighted the transformation from a market restricted by exclusive contracts favouring big players in international transactions to a more open and inclusive space that allows for domestic, regional, and international remittances. In the past, high prices were a significant barrier, but the advent of digital remittances has started to address this issue, although cash remains important due to cultural and behavioural factors.

The region’s people embrace digital tools but still value the human element. For example, using digital wallets for making in-person purchases keeping the face-to-face experience intact. It’s a reminder that, even in our tech-driven world, the human connection remains a crucial part of how Africans handle their finances.

There has been growth in various sectors, such as mobile money, payments, sending goods, and B2B remittances, indicating the expanding horizons of remittance services. Furthermore, the informal market, once overlooked, is now recognised as a major untapped opportunity in the evolving landscape of remittances in Africa.

George recalls how in the past there was a heavy reliance on fax for transactions, which could take up to a week, whilst the shift to bank deposits seemed promising for quicker transactions, the uptake was low due to financial exclusion. The prevalence of cash transactions in Africa posed challenges for cash pickup in banks, requiring identification. However, the digital revolution, with its elimination of such barriers, has unlocked the potential. The increasing role of Mobile Network Operators (MNOs), expanding rapidly across Africa, is a key driver of this growth, making the remittance landscape more accessible and promising for the future.

Reynell delves into the changing dynamics from a banking perspective. Historically, banks in Africa primarily focused on settlements, with the actual business of money transfers being led by Money Transfer Operators (MTOs) and Payment Service Providers (PSPs). Remittances, play a crucial role in contributing significantly to the GDP of African countries, with figures ranging from 5-6% in countries like Ghana and Nigeria, and up to 10% in other regions. This underscores the economic importance of remittances in the African context.

The regulatory environment in Africa presents a hurdle, slowing down the pace of innovation for banks. Unlike MTOs, many banks in Africa still operate in person, leading to higher operational costs. This insight showcases the need for adaptation and innovation within the banking sector to keep pace with the evolving remittance landscape in Africa. Despite these challenges, Reynells perspective highlights the immense significance of remittances for African economies and the imperative need for banks to navigate regulatory complexities to actively participate in the changing dynamics of the remittance market in the continent.

What should companies be thinking about when entering this market?

It’s crucial to have a well-thought-out strategy when venturing into the African remittance market. Licensing requirements, play a pivotal role in determining the speed of market entry. Partnerships are another key factor that can significantly accelerate the entry process, emphasising the collaborative nature of the industry.

You can easily tap into reliable partners to fast-track your entry into the market through RemitONE Connections to secure you with an instant business community that would take months and years to build yourselves within the Africa region. This also means you must have flexible technology with strong API integration capabilities to connect, RemitONE’s Money Transfer Platform is both modular and scalable. For more information get in touch with us at sales@remitone.com.

Temi suggests, a targeted strategy focused on specific regions is more effective rather than adopting a broad approach. For instance, in francophone regions of Africa where french is widely spoken as a second language, similar regulations and cultures prevail. By tailoring strategies to these specific regions with shared characteristics, one can enhance the effectiveness of market penetration.

George reassures that entering the market shouldn’t be daunting as specialists are available in every country to help guide you through the loops. However, a thorough understanding of the local customer dynamics, including their behaviour, attitudes, and cultural nuances is essential. He advocates for a more strategic approach that involves aligning with the demographic profiles of potential customers that resonate with the services your company offers. This perspective underscores the importance of cultural sensitivity, customer-centric strategies, and long-term relationship building as key considerations for companies seeking to successfully enter and navigate the African remittance market.

What innovative technologies and platforms are reshaping the way remittances are sent and received in Africa, and how are they increasing financial inclusion?

Mobile money has significantly altered the dynamics of remittance transactions with the help of the widespread ownership of mobile devices, coupled with increased telecommunications access, which has catalyzed a notable surge in remittances across the continent. Partnerships between remittance providers and telecommunications companies like Safaricom, have also played a pivotal role. This collaborative approach has proven instrumental in fostering innovation within the industry, creating a synergistic environment where different players work together to enhance services and accessibility.

Furthermore, the adoption of stablecoins, with the involvement of companies like Stellar and Ripple, is an emerging trend. These digital assets provide stability in value and are being utilised by companies to facilitate remittance transactions, offering an alternative to traditional currency-based transfers.

Interoperability, between mobile wallets, bank accounts, and cash through partnerships, is another critical aspect of the evolving remittance landscape in Africa. The seamless connectivity between various financial instruments and channels ensures a more inclusive and user-friendly experience for individuals sending and receiving remittances.

What challenges do African diaspora communities face when sending remittances, and how can these obstacles be addressed to improve the flow of funds?

High costs associated with remittances into Africa continue to persist, irrespective of the sending country, attributable to both financial and regulatory obstacles. Despite the advent of mobile money, Reynell believes certain African countries still heavily rely on physical locations such as banks or MTOs, posing difficulties for beneficiaries in accessing funds.

Additional challenges faced by the underbanked, particularly in rural areas and villages, where limited access to banks poses a significant barrier. Foreign exchange (FX) fluctuations were identified as another obstacle, leading to reduced amounts being received by the recipients. In addition, regulatory challenges also extend to the senders, particularly undocumented migrants who wish to send funds. The need for proof of address or source of funds presents a barrier, hindering their ability to send remittances until these documents are provided. To mitigate this challenge, George proposes that an alternative solution would involve embracing informal money transfer methods as well as the increasing interoperability between MNOs which will provide new opportunities for more efficient and cost-effective money transfers.

Ababacar further observes that while Africans can travel between countries with just their ID, the requirement for a passport when sending money presents a misunderstanding and inconsistency that act as barriers to entry for remittances from the diaspora. This discrepancy in identification processes poses a challenge, adding an unnecessary layer of complexity for individuals attempting to send funds.

He further points out the lack of interoperability across the continent. The absence of a unified system restricts some diaspora communities from utilising MNOs as a viable option for remittance transactions. This limitation not only hinders the accessibility of services but also contributes to the overall challenge of navigating the remittance landscape.

Also, within many MNOs, there isn’t an available option to transact money in different currencies. This lack of flexibility in currency options adds another layer of complication for the diaspora communities attempting to send funds across borders.

To tackle these challenges, improving identification processes by harmonising them with the adaptable regulations in Africa may help alleviate inconsistencies in requirements. Furthermore, fostering interoperability across the continent would amplify the accessibility of remittance services for diaspora communities. Urging MNOs to offer transaction options in various currencies would significantly ease the flow of funds, catering to the diverse needs of the African diaspora.

What innovations are emerging within the mobile money ecosystem that have the potential to further enhance the convenience and efficiency of remittance transactions?

Mobile money services have notably increased accessibility by introducing digital wallets accessible through mobile phones. These mobile wallets have evolved beyond simple remittance tools and can now function similarly to bank accounts, offering users the ability to engage in activities such as loans, savings, bill payments, and more through dedicated mobile apps.

The widespread adoption of mobile wallets has spurred further innovation, with the integration of technologies like artificial intelligence (AI) to assess credit scores. This, in turn, enables the provision of loans and overdrafts based on users’ spending patterns, showcasing a holistic approach to financial services within the mobile money ecosystem.

George highlighted the cultural integration of mobile wallets in African daily life, noting that some individuals receive their salaries exclusively through mobile wallets. This trend has led to mobile wallets becoming integral to people’s lives, so much so that even transport providers can be paid using mobile money. The efficiency and convenience offered by mobile wallets have positioned them as more than just a substitute for traditional banking; they have become the preferred choice for many. Euromonitor International found in the sub-Saharan African region, there were over 600 million registered mobile money accounts, facilitating transactions exceeding USD 600 billion in 2022, with it expected to grow even more in the coming years, especially with the help of central banks reducing barriers to entry.

Moreover, George speculated on the future trajectory, foreseeing a potential end to the dominance of cash in the coming years. However, he acknowledged that this transformation depends on continued investments in the economy and the infrastructure required for the digital revolution to take root.

Priscilla added to this narrative by drawing parallels with Brazil, where digital payments, exemplified by Pix payments, have also been gaining prominence. These digital payment methods contribute significantly to driving economic growth, simplifying transactions, and mirroring the trend observed in the African mobile money ecosystem.

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