Posted on by Miguel Granier

Remittances and Mobile Money

Remittances and mobile money have played a big role in promoting financial inclusion in emerging markets. Currently it’s a market dominated by big players like Western Union, but more and more often we’re seeing localized startups like Remit in Uganda looking to make financial services even easier and more inclusive.

“Safaricom Deal to Allow Diaspora to Send Money to M-Pesa Accounts” by Chris Udemans on HumanIPO

The growth of mobile technology has had a profound, positive impact on money transfers and remittances. This is especially true in emerging markets such as Kenya, where the amount of adults using mobile money services (11.5 million) is more than double the amount of those who use traditional banking services (5.4 million). The success of M-Pesa in Kenya has been well documented over the past years, with over 25% of the country’s GDP currently flowing through it. The convenience of the service is set to increase with a new deal between Safaricom and Skrill, an online remittance platform based in the United States. Kenyans living in other countries will soon be able to send money directly to M-Pesa accounts to be instantly deposited in the end user’s mobile wallet. The use of Skrill will greatly increase flexibility in sending money back home at a low cost (just a 1% fee).

“Moneygram and Vodafone M-Pesa Bring Mobile Remittances to New Countries“ by Loek Essers on CIO

MoneyGram and Vodafone have agreed to allow users to send funds through their services directly to an M-Pesa account. Starting in April of this year, users in almost 200 countries and territories will be able to use the transfer agents to instantly send money. This will strengthen the ability of consumers in rural areas to pay bills, withdraw money, or make transfers themselves. With more similar agreements planned for the remainder of 2014, M-Pesa is making great strides to build on its already successful model and increase financial inclusion across the globe.

“Ugandan startup making it simpler for African migrants to send money home“ by Dinfin Mulupi on How We Made it in Africa

Remittances through mobile transfer agents totaled more than $60 billion for Africans living abroad. At an average of 12%, fees charged by the transfer companies took more than $7 billion right out of the pockets of Africans and their families. Businesses like Redcore interactive, a Ugandan startup operating a payment platform called Remit, are making strides to try to solve this problem. Remit currently charges a service fee of 5.4% and is set to decrease in the future. Stone Atwine, CEO of Redcore, sees the 5.4% fee as “a bit on the higher side,” despite it being less than half the average of 12%. Redcore and other startups like it will face many hurdles, including funding, regulations and banks not cooperating, but the wheels have certainly started to turn and things are moving in the right direction.

“Why Financial Inclusion Matters” by Marie von Hafften on Global Envision

Despite the number of remittances services popping up, access to the financial system is currently out of reach for more than 2.5 billion people worldwide. Financial inclusion provides those living in poverty with opportunities to further their education, invest in their small businesses, or improve their homes. Finding a way to spread financial inclusion will require the concerted efforts of banks, NGOs, governments and corporations alike. Innovation and technological developments will be crucial to these efforts in the years to come. Remittance services and/or collaborations like the three described above are good signs of progress.