As urbanisation accelerates globally, tens of millions of Africans leave home for economic opportunities in cities. Many of these individuals made the ultimate sacrifice of having to leave their loved ones and move thousands of kilometres in search of these prospects. However, sending money home remains a huge challenge for those without a bank account forcing migrants to use informal or illegal channels. These channels are expensive, lack transparency when it comes to pricing and are often delayed.
World Bank statistics show that the ten most expensive cross-border remittance corridors are all in Africa and that South Africa remains the most expensive G20 country for remittances with an average cost of 14%. The recent entry of technology start-ups into this space has reduced cross-border remittance costs to 5%, in-line with international benchmarks. Furthermore, the data further reveals that only 34% of adults in sub-Saharan Africa have access to a financial account. Today, 12% of Africa’s adults have a mobile money account specifically due to Kenya’s MPESA that pioneered the move towards it on the continent.
What is required is a low-cost solution that offers migrants a fast, cheap and secure way to send money home. A regulated system and access to a safe and reliable network is also needed as assurance to senders and their recipient family members. Technology entrepreneurs can create massive amounts of shared value for all parties if given an enabling regulatory environment and a collaborative network of partners.
This is where the South African Reserve Bank deserves credit for its role in striking a balance between fostering innovations and protecting the financial system. Financial regulators have the difficult task of governing a critical industry that is at the beginning stages of a technological revolution.
Digital and mobile has the ability to transform the African financial services and banking industry by growing the revenue pie whilst positively impacting the lives of millions of people at the base of the pyramid. Fintech entrepreneurs are working together with mobile money operators, banks and retailers to enrich their ecosystems and offer richer value propositions to their customers. This collaborative mind-set, is unfortunately not shared by all players in the industry, with many incumbents trying to block new technologies and platforms that facilitate interoperability.
Technology entrepreneurs, given the enabling regulatory environment, are the only ones capable of solving this problem whilst creating value for all parties. The problem is so big and the rewards so large that no single firm can solve them. Entrepreneurs need to collaborate with an ecosystem of partners who will all share in the value created.
