Money trans­fer com­pa­nies

Finweek English Edition - - MONEY -

Tra­di­tional cross-bor­der money t r a n s f e r c o mpa n i e s a r e em­brac­ing tech­nol­ogy and mo­bile money plat­forms to help them stay af loat in the face of in­ten­si­fy­ing com­pe­ti­tion from new and fast-de­vel­op­ing plat­forms.

Western Union, Money­Gram and Mukuru.com are among the popular plat­forms for cross-bor­der re­mit­tances in South­ern Africa. Th­ese plat­forms have how­ever found com­pe­ti­tion from mo­bile money plat­forms, with in­for­mal chan­nels such as send­ing money through bus driv­ers adding to the pres­sure.

Re­tail and bank­ing com­pa­nies have also en­tered into part­ner­ships for cross­bor­der re­mit­tances. Western Union and Money­Gram have em­braced mo­bile com­pa­nies after an­nounc­ing part­ner­ships with Zim­babwe’s EcoCash and Kenya’s M-Pesa re­spec­tively last week. Money re­mit­ted through Western Union is now ac­ces­si­ble in the mo­bile wallets of EcoCash users in Zim­babwe.

Richard Mal­com, the re­gional vice pres­i­dent for Western Union in East and South­ern Africa, tells Fin­week that the company is em­brac­ing mo­bile and other tech­nolo­gies to main­tain its rel­e­vance in the face of rapid changes in the way ex­pats re­mit money back home.

“We have started do­ing pay­outs to mo­bile phones in Zim­babwe. We have 230 branches pay­ing out cash and there are more chan­nels com­ing up into the countr y. We need to main­tain our rel­e­vance in the f irst in­stance,” said Mal­com.

In 2013, re­mit­tances worth about $1.8bn were trans­ferred to Zim­babwe t hrough for­mal chan­nels, although ex­perts say the f ig­ure for money sent through in­for­mal chan­nels could be sig­nif­i­cantly higher.

Mal­com views South Africa as a big cen­tre for ex­pat re­mit­tances into other African coun­tries be­cause of the big­ger size of its econ­omy. Western Union is now po­si­tion­ing it­self to cap­i­talise on the grow­ing ex­pat pop­u­la­tion in SA in­tend­ing to send money back home.

“South Africa is a very key des­ti­na­tion coun­try. It’s one of the ma­jor av­enues. Zim­bab­weans in South Africa are a ma­jor cor­ri­dor for money re­mit­ted back to Zim­babwe.”

In the re­gion, An­gola and Mozam­bique are also key mar­kets that are set to be big­ger cen­tres from where money will be re­mit­ted into the rest of Africa. The global money re­mit­tance in­dus­try is es­ti­mated to be worth about $300bn per year.

Mal­com said Western Union’s share of this mar­ket was just be­low 20%. In­for­mal chan­nels are said to ac­count for a big­ger por­tion of the mar­ket share.

How­ever, the likes of Western Union and Money­Gram also have to do with reg­u­la­tory bot­tle­necks and lim­its in some key African mar­kets, although Mal­com said the company al­ways had to play by the book.

Zam­bia has an out­bound l imit of $1 000 while in SA, tight ex­change con­trol reg­u­la­tions mean stricter li­cens­ing mea­sures. Western Union for­ayed into the SA re­mit­tance in­dus­try in 2008 after part­ner­ing with Absa.

The company is now ex­pand­ing its foot­print in SA through en­list­ing for­eign ex­change bu­reaus as agents. Ex­pan­sion plans for the company in the coun­try in­clude set­ting up kiosks from which those in­tend­ing to re­mit money can carry out trans­ac­tions.

Long queues will be a thing of the past once new and im­proved ways of send­ing re­mit­tances gain mo­men­tum.

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