Money transfer companies
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.