In Africa, where little infrastructure exists for cross-border payments, telcos are stepping in to fill the void. Another milestone launch has taken place in the rapidly growing cross-border mobile payments industry. MTN, Africa’s largest telecoms group, has announced a new cross-border remittance service for its Mobile Money customers in Rwanda and Uganda. Alix Murphy, senior mobile analyst at WorldRemit, writes
The service enables an MTN Mobile Money customer in Rwanda to send money from their phone in Rwandese Francs directly to a recipient in Uganda, who will receive it into their MTN Mobile Money wallet in Ugandan Shillings.
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Remarkably, and unlike many of the cash and agent based services offered by traditional money transfer operators, MTN’s mobile cross-border transactions are instant.
For MTN’s 8.2 million Mobile Money users in Uganda and 3.2 million users in Rwanda, this is a phenomenal deal.
Mobile Money is a simple digital account linked to a mobile phone number, which can be used to pay electricity bills and make purchases, and to receive and send money to other people.
In developed countries, the Mobile Money services operated by MTN are often overlooked or misunderstood. But they are part of a large and rapidly growing industry of mobile payment services for unbanked users around the world. As of December 2014, there were over 103 million active Mobile Money users globally, up from just 60 million a year earlier.
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By GlobalDataSome of the biggest markets for these mobile payment services are in places like Bangladesh, Tanzania, or Zimbabwe, where well over 60% of the population is without a formal bank account.
In Uganda, 53% of the population uses Mobile Money. The Rwandan ICT ministry recently noted that the country has more than three times as many Mobile Money users than bank account holders.
MTN’s cross-border initiative is part of a growing trend of telecoms operators looking to open or expand their ‘closed loop’ systems, giving Mobile Money customers greater options to send money to users in other countries or on other networks.
In 2013, telecoms giant Tigo Millicom first launched international transfers between its Tigo Cash users in Rwanda and Tigo Pesa users in Tanzania. Tigo also manages the currency conversion without the use of an intermediary. Reconciliation is relatively simple as transactions still take place within Tigo’s own group and operating system.
Since then, a flurry of similar announcements have come over the past 18 months. Entering into strategic partnerships, otherwise rival telecoms groups are committing to interconnect their Mobile Money networks to allow customers to send money to family members or business associates in neighbouring African countries.
At the same time, intermediary service providers are also entering the field to deliver technical support, settlement and aggregation services. In the case of MTN’s Rwanda-Uganda initiative, transactions are handled through MFS Africa, an aggregator which also works on similar cross-border initiatives with Orange Money operations across West Africa.
New companies and services are seizing on the vast intra-African payments and money transfer opportunity: intra-African trade grew 50% between 2011 and 2013 to $61 billion. Remittances, the small amounts of money sent home by family members working abroad, are estimated to be $53 billion to Africa in 2015. Factoring in all the transactions flowing through informal channels, estimates suggest the total could be more than twice as much.
Put together, there is a powerful incentive for partnerships that can facilitate instantaneous transactions at a much lower cost than other alternatives.
These partnerships are truly transforming the intra-African remittance market, bringing direct mobile-to-mobile money transfers into an industry so long rife with inefficiencies, extortionate fees, and lack of transparency.
That said, there is one area which telecoms operators are not able to address on their own. Significant African diaspora populations live outside of the continent, in Europe, North America, or Australia. Without a local presence, reaching these communities becomes a much harder task. Moreover, the vast majority – over 90% – of global remittance transfers are still sent offline, at high-street agents dealing in cash.
Channelling remittances from diaspora communities into Mobile Money wallets requires partnership with companies that can serve customers on the sending-side, and that have the brand recognition, technical capability and robust compliance platform to offer a trusted service.
Most importantly, it also requires working with businesses that clearly understand customers’ expectations of the speed and simplicity which they are accustomed to when using Mobile Money back home.
Companies like WorldRemit, which operates in over 50 countries and allows people to send to 125 destinations, are changing the face of international money transfers by taking them mobile, making sending money "as easy as sending an instant message". With the WorldRemit app, people can send money directly to their family or friend’s Mobile Money wallet, making the service mobile on both ends.
In partnership with WorldRemit, major telecom operators like MTN, Tigo Millicom, and Econet have been able to expand the scope of their Mobile Money offering to diaspora communities abroad and also drive usage of wallets within the wider Mobile Money ecosystem. Econet, Zimbabwe’s largest mobile operator, found that 22% of customers receiving international remittances into its EcoCash wallets via WorldRemit were making a secondary transaction, such as paying a bill or school fees, from the wallet within two days of receiving the funds.
Transfers to Mobile Money via WorldRemit now represent over 50% of all of WorldRemit’s money transfers going to Africa. In countries like Uganda, Tanzania and Zimbabwe, Mobile Money has become the preferred receive option on WorldRemit, overtaking cash pick-up and bank deposits.
This is a great coming together of industries – of telcos coming into the pan African field, and other companies like WorldRemit coming in to serve the international element with instant mobile-to-mobile transfers.
The African Mobile Money transfer industry will continue to be a dynamic and transformational sector for both cross-border and international remittances. For those wondering where the industry is going next, watch this space.
Alix Murphy, senior mobile analyst, WorldRemit
