For a continent highly dependent on remittances, no technology could have been a better blessing than mobile money, which is growing at an amazing pace as it extends financial services to the remotest of African locations.
Sub-Saharan Africa will receive about $33 billion in remittances this year and a large part of the sum will be sent through mobile money. Several payments are also being made across the continent using the technology.
Ismail Ahmed, CEO& Founder of WorldRemit, a global remittance company believes so much in the future mobile money holds for Africa. He expects that by 2030, 2 billion people who do not have a bank account today will use mobile money.
In this interview with Ventures Africa, Ahmed speaks about the importance of mobile money to Africa and how it is helping the country save billions of dollars hitherto lost to ‘remittance super-racket’.
Ventures Africa (VA): Africa is today the mobile money king of the world. What do you think is responsible for this?
Ismail Ahmed (IA): Mobile money is a technology that fills an important human need – access to financial services and all that comes with it. In Africa, this need was first effectively addressed by regulators and mobile operators, and accordingly we have seen mobile money take off in a variety of countries – Kenya, Somaliland, Tanzania, and Zimbabwe, to name just a few. Africa also showed us that mobile money is in fact scalable to now serve more than 100 million active users and enable add-on services such as mobile insurance and mobile savings.
VA: How has Africa gained from the impact of technology on the remittance industry?
IA: The impact of technology on remittances to Africa is two-fold: On the receiving side, the mobile money infrastructure provided by our telecoms partners has vastly increased access to financial services. Just think – mobile money agents far outnumber bank branches across Africa, and there are already 15 African countries with more mobile money accounts than bank accounts. On the send side, technology companies such as WorldRemit are putting competitive pressure on the old-fashioned, agent-based players whose dominance has created a “Remittance Super Racket” – as the Africa Progress Panel called it. By taking the industry online and refusing to engage in anti-competitive practices, we are bringing fairer, lower cost remittances to Africa.
VA: One would expect Nigeria, Africa’s most populous nation to be a hotspot for mobile money but the adoption is very low when compared to Kenya. Why do you think this is so?
IA: It is true that although Nigeria has more licensed mobile money services than any other country in the world, adoption has been somewhat slow. We know that regulation in Nigeria has made it difficult for mobile operators to fully participate in mobile money and provide the needed access points – especially in rural areas. From experience, the brand recognition and agent networks of telcos are important stepping stones to mobile money adoption, something that will need to be addressed in Nigeria.
VA: East Africa leads other regions in the adoption of mobile money in Africa. Why do you think this is so?
IA: Many people talk about the success of M-Pesa in Kenya as the cradle of mobile money. That’s certainly a fair assessment, but you need to look beyond M-Pesa to explain the amazing rates of mobile money adoption in East Africa. For example, I know from my own experience that thanks to Zaad’s mobile wallet, Somaliland has become an almost cashless society. The success of Zaad is not least due to brilliant initiatives in educating both customers and agents about the service. Another factor may be interoperability: Tanzania, where we send to TigoPesa and EzyPesa wallets, has been an important market where operators have recently struck interoperability deals to make domestic transactions easier for customers.
VA: Earlier in the year, A US bank, which helps Somalis based in the country to transfer money to relatives back home, stopped the service for fear it was facilitating funds transfer to terrorists. But several reports have highlighted the importance of such funds to Somalis. How can WorldRemit fill the void left by the US Bank?
IA: The problems associated with money transfers to Somalia are real, not imagined. Ultimately, I am convinced that part of the solution will be technological, because of the improved compliance which this can offer.
VA: What is the worth of the annual remittance to Africa by WorldRemit?
IA: While we want to remain confidential about such business information, I can tell you that Africa is certainly one of our key markets. African diaspora communities around the world maintain strong personal ties to their home countries, which is reflected in the number of transfers we handle at WorldRemit.
With strong business fundamentals in Africa, we also expect to see a major uplift of annual remittances following our partnership with MTN and our launch in the United States. We can already see people in the US using WorldRemit to send money to Africa, which has been an underserved market in the US so far.
VA: Which African region holds the largest amount of monthly transfers through WorldRemit?
IA: It is difficult to pinpoint a specific region – I would say in terms of monthly transfers we are equally active across the whole of the African continent. Some of the largest numbers of transactions go to Kenya, Nigeria, Ghana, Zimbabwe, and Uganda –which is in itself a great reflection of our broad geographical footprint across Africa.
VA: WorldRemit has gotten investments of over $100 million in less than two years, what does this say about the future of remittances and WorldRemit’s approach?
IA: The two major investments we received from Accel Partners and TCV are testament to our strong business proposition and point to the future of the remittance market. Clearly, incumbents such as Western Union and MoneyGram have failed to modernise and foresee trends in technology and human behavior. Our promise is as simple as it is convincing – to make sending money home safer, more convenient, and more transparent. With the investments we received, we will continue to build our company along this mission and expand both our partnerships with mobile operators as well as our geographical footprint.
VA: You have struck partnerships with EcoCash and MTN. Do you plan to increase such partnerships to grow your business in Africa?
IA: Absolutely. Working in partnership with with EcoCash and MTN holds unique benefits for us – we are able to deeply integrate our technical systems to and enable instant transfers to those mobile wallets. On top of that, we are able to better engage with their customers and address real needs. So there is no question that we will aim to set up more partnerships with mobile operators as soon as possible – in fact, we are close to launching instant mobile money transfers to EcoNet in Burundi.
VA: What other forms of partnership are you considering?
IA: Many. Around the world, we work extensively with a network of partners including major banks and mobile operators. Every single partnership and technical integration is a huge asset to our service and directly benefits our customers. With the investments we have received, we will be expanding our network of partners to serve more and more customers where we can make the biggest difference.
VA: How far has mobile money been able to help Africa increase financial inclusion?
IA: Bill Gates recently made a big bet that almost everyone will have a mobile money account. We expect that by 2030, 2 billion people who do not have a bank account today will use mobile money. Undoubtedly, Africa will be one of the main beneficiaries of this development – according to the GSMA’s latest report Sub-Saharan Africa alone accounts for more than half of the world’s live mobile money services.
VA: What is WorldRemit’s unique plan for Africa?
IA: At WorldRemit, we see ourselves as paving the way for seamlessly connecting Africans around the world with friends and family back home. With fair and transparent prices, we are challenging the “Remittance Super Racket” of incumbent money transfer companies in Africa which continue their practices of agent-exclusivity arrangements and charging unreasonable fees. We are embracing mobile money as new technology that is set to revolutionise banking from the ground up and make money transfers more convenient for everyone.