Talking about mobile money at the Afrikoin conference in Nairobi cannot be done without tackling the hot topic of remittances. The African diaspora sends $60bn/year back to their families and friends back in their respective countries, with Kenya accounting for $1.1bn.
Remittances are a hot topic for four reasons:
- Remittance fees (12%) are higher in Africa than in any other continent (the global average is 8% and in South-East Asia it is a mere 4%)
- Bitcoin is expected to boom mainly as an easier and cheaper mean for diasporas to send money back to their families.
- The world is becoming more mobile and technology is allowing more of them to accelerate the flow of money back home
- And, of course, we’re in Nairobi, Kenya, the world capital for mobile money, with many startups pioneering the field of digital currencies.
But it costs a lot, as anyone doing a transfer at Western Union or Moneygram can attest. Money transfer companies pay a lot for compliance. In the US for instance, they have to get a licence for each of the 50 states they operate in. The process of sending money through these companies is also painful, with many manual operations and long queues for customers on week-ends.
African startups are finding innovative solutions in this field:
- by substituting money with gifts, as Zished, a startup from Ghana, is doing. People send back money partly for gifts or social celebration, and gifts don’t need to comply to strict regulations
- by targeting the 2nd generation of emigrants who are born in a foreign country and are more tech-savvy, but who also maintain close links back home
- by converting money into airtime. Airtime is like a mobile money in Africa, as you can use it to pay bills or to send gifts as well. This is where AirPesa is positioning itself (airtime and gift vouchers)
Still, challenges abound to make the remittance business more digital and user-friendly:
- Cash is king, as Spencer Okach from Equity Bank in Kenya stresses. People want their money, and want it fast. It can take up to 5 days to get the money sent from overseas.
- Fraud is big, with people stealing credit cards or forging identities upon receiving payments.
- Regulations are obstructive. It took to Seattle-based Coinfling 5 months to get a licence to be a money sender back to African countries.
All in all, it’s easy to see how Bitcoin will disrupt a banking and money industry characterized by gatekeepers, exclusivity and multiple checks. Startups like BitPesa or Kipochi, both based in Nairobi, will continue to try to introduce crypto-currency to remittances to make them cheaper, anonymous and more user-friendly.
It is also a market where the first startups will be able to grab a bigger market share. Not all regions will be interested (fees in South-East Asia are already very low), but from India to Latin America, there are definitely a lot of opportunities for Bitcoin’s remittance solutions.
As a little point of interest, the micro-remittance market ($20 and less) has been poorly addressed by the giants of the industry. Much potential could lie here.