Mobile Money is Finally Found by the Tech Revolution in Africa
African Business Review
By Matthew Staff | Sunday, November 23, 2014
WorldRemit has taken the bull by the horns in Africa, making the most of a mobile money industry which has, until recently, been relatively dormant despite the acceleration of tech activity occurring elsewhere in the region.
To get to the bottom of the reasons why, and the potential of the trend moving forward, we spoke to the company’s Head of Communications, Iain Mackenzie who firmly believes that the platform is in place for financial services to catch up with neighbouring sectors over the coming months and years.
African Business Review (ABR): Firstly, tell us about WorldRemit and the reasons for its success.
Iain Mackenzie (IM): WorldRemit is an online money transfer service that lets people send to more than 100 countries. We offer a low-cost alternative to over-priced transfer agents, with the convenience of sending from a computer, smartphone or tablet.
Amazingly, until recently, the money transfer business had remained largely untouched by the technological revolution. People were sharing pictures and sending instant messages around the world, but still leaving the house and queuing up to send money.
ABR: How would you describe the current remittance market in Africa?
IM: As with all things in Africa, you can’t generalise about an entire continent. But we know from the World Bank that Africa receives around $32 billion per year in remittances and that number is rising.
However, some countries are more reliant than others. In Liberia remittances account for 23 percent of GDP, compared to just over one percent in Guinea.
One general observation that we can make is that Sub-Saharan Africa fares worst in terms of punitive transfer fees, with traditional transfer firms adding an average mark-up of around 12 percent. That’s despite the G8 and G20 supporting a target rate of five percent.
ABR: Why do you think that mobile money is so important for the money transfer sector in Africa?
IM: There are 246 mobile money services in the world and most of those are in Africa. The continent has leap-frogged the ‘developed’ world and gone straight from cash to mobile money. In fact, there are nine countries in Africa where Mobile Money accounts outnumber bank accounts.
The popularity is probably down to a combination of infrastructure and convenience. Mobile networks can offer an anytime, anywhere service and users don’t have to visit a physical building to manage their finances.
What is most exciting is that of the world’s 2.5 billion unbanked people, one billion already have a mobile phone, so the potential for expanding financial inclusion through mobile money is huge.
Remittances will be a big part of that, which is the reason we enable transfers to mobile money services.
ABR: What impact can mobile money have on African economies?
IM: Undoubtedly the biggest opportunity is extending financial services to those who currently have no access.
If you live in a cash based economy, your capacity to give and receive money is limited by physical proximity. With Mobile Money, people can accept payments from further afield allowing them to scale-up a business.
They can shop-around for the best deals on services such as insurance or education, and they can receive money from friends and family overseas in a way that is extremely fast and convenient.
ABR: What further steps can be taken to promote financial inclusion in Africa?
IM: Connectivity is a massive issue, but contrary to popular belief in the west, it is more about affordability than infrastructure.
Companies such as Google and Facebook are exploring innovative ways of extending free or cheap internet access which will, in turn, lead to wider availability of so-called ‘basic’ or essential services. Financial services, alongside health and education will doubtless be part of that.
To make it work, telcos in particular will need to be open to new business models and we will probably see several years of experimentation with free and premium services delivered via mobile across Africa.
(Source: African Business Review)