Transformations in African remittances are emerging

In the dynamic landscape of African remittance markets, a diverse array of actors are vying for dominance. These include fintech companies, traditional banks, money transfer operators (MTOs), mobile network operators (MNOs), and more, each pursuing strategies designed to increase market reach and efficiency.

Strategies range from forming strategic partnerships, adopting digital payment solutions, expanding product portfolios, leveraging mobile money platforms, and enhancing cross-border payment networks. Key players are keen on innovation, strategic partnerships, acquisitions, and expanding distribution to maintain competitive advantages in the growing digital payments ecosystem in Africa.

Two companies, Chipper Cash and Eversend, have already ventured into digital banking, focusing on intra-Africa cross-border payments and a broader set of financial services. Their aim is to capitalise on the growing opportunity for within Africa remittances, expected to continue alongside established diaspora corridors.

Despite this, traditional players such as Western Union, MoneyGram, and Ria continue to dominate the market due to their large retail networks and partnerships with major financial conglomerates. However, the rise of digital remittance players like WorldRemit and Azimo, partnering with mobile wallet providers and offering cash payouts, is gradually challenging this status quo.

The landscape of African remittances is also marked by a significant digital shift. While cash pay-ins and pay-outs remain dominant, accounting for 90% of total pay-ins at Mama Money, digital payment methods such as bank account-based remittances and wallets are gaining ground, particularly in countries like Tanzania and Kenya.

This digital shift is driven in part by the increasing mobile population across Africa and the increasing competition in formal channels, which is driving down costs. Informal channels, such as sending money through bus drivers, are still widely used but are becoming less common due to this competition.

Notably, new products are emerging to improve overall financial inclusion. As of 2017, only 33% of the adult population in Sub-Saharan Africa owned a bank account. However, efforts are being made to bridge this gap, with companies like Mama Money building banking products specifically for diaspora workers.

Physical agents remain essential in Africa due to the dominance of cash, but their role is different from that in other parts of the world. They also play a crucial role in improving financial and technological literacy.

In conclusion, the African remittance market is witnessing a period of significant change, driven by innovation, competition, and a focus on financial inclusion. As digital payment methods gain traction and funding and product development increase, it is an exciting time for both investors and consumers in this rapidly evolving industry.