The Remittances Market in Africa
Remittances play a significant role in development across countries in the world. It is among the top export earner in several countries in the continent. According to the African Economic Outlook (2016), total remittances to Africa were at 3.28% of GDP, and forming over 20% of GDP in some countries such as Gambia, Lesotho, Liberia and Comoros.
- Nigeria and Egypt take bulk of remittance, accounting for about two-thirds of the amount to the continent.
|Country||Amount $ US (Billion)
- The mobile money services are growing and becoming a key channel. According to the GSMA’s Mobile money report 2017, there were 277 live mobile money services worldwide in 92 countries. Overall, the FinTech space is growing rapidly, especially across Africa.
To better understand how the players in the sector are meeting the customer needs, especially across Africa, we had a discussion with Xpress Money, a player in the remittances market. The Chief Operating Officer, Mr. Sudhesh Giriyan, as well as the Vice President – Global Marketing, Mr. Ashwin Gedam took us through key areas in navigating this market.
Question: What is Xpress money and what is your mode of operation?
Xpress Money: We are an international money transfer organization, among the top 3 brands today by volume and network. Our network covers both pay in and payout i.e. for sending and receiving money. We work with many partners including players in the banking, non-banking areas; financial corporations; retail as well as telecom partners for remittance business.
Xpress Money started in 1999 in the UK, and then started growing the global network by putting up an agency here in the Middle East, and then South Asia and South East Asia, then expanded to Africa.
Overall, we are in over 160 countries around the world and we are looking forward to covering over 200 countries in the next 12 – 18 months, especially for cash payouts services.
Question: What types of services do you offer your customers?
Xpress Money: The main services include; cash payouts and also account credits. The global remittance business today is about US$ 600 billion, out of which 75% is via account credit, and 25% via cash payment. Account credit is where the money gets to the beneficiary’s account. Cash payout is where one sends money to a receipt for payout over the counter. Then also via mobile money transfer, and other FinTech intermediaries, which are becoming key enablers in the business.
Account credit may be few in volume, but high in value, at about US$2,000 to US$2,500, while the cash payout in high in volume but remit about US$ 350 – US$400 per transaction.
Question: What are your main corridors of remittances across Africa?
Xpress Money: North Africa has been an area under our coverage – Tunisia, Egypt, Morocco, and Mauritania.
Good growth was then registered in markets such as Kenya, Nigeria, Ethiopia, Ghana and of late Uganda. Other countries in Africa showing good signs of growth such as Western Africa region of Cameron, Ivory Coast, Senegal, Niger, Burkina Faso. We are now covering most of Africa.
Question: What about other regions?
Xpress Money: A few years back, key remittance markets were India, Bangladesh Pakistan, and the Philippines. We still refer to them as the traditional markets. We have grown in Asia. The Philippines has been a good market for us. We are constantly growing our footprint in markets such as Indonesia, Thailand. China will soon be under the network, where we are working with strong partners, which we expect to be a high inbound market.
From source markets, besides the GCC countries, Jordan and Lebanon, we also have a large market in South Africa, UK and Turkey. We have witnessed growth in the Scandinavian market, North America and Hong Kong.
Question: How would you describe the remittances business within the GCC Markets (Cooperation Council for the Arab States of the Gulf?)
Xpress Money: The GCC market collectively does over US$100 billion. If you include the Levant (Jordan and Lebanon), then comes to about $110 Billion, which is approximately 18% of the global remittances market.
The region now has two of the world’s leading remittances market. The USA is the leading market in the world with a volume of about US$135 Billion. Next is Saudi Arabia at US $45 Billion and then UAE at US$30 Billion. Qatar and Kuwait are also over the US$10 Billion category. Oman and Bahrain are also important. Hence, the region is key contributor in the remittances market.
Question: How do you develop your partnership globally?
Xpress Money: We keep developing partnerships – it is a continuous process. We have partnerships around the world, that is how we have covered 160 markets globally. We also have some indirect partnerships, for instance, with Ria and World Remit, global players in the remittances business.
Question: What will make a customer choose Xpress Money from competition?
Xpress Money: This business operates on two main fronts; one is the push and other is pull. Push is through the agents. Our agents are happy with us because of the model that we have with them especially the revenue sharing aspect, which is notch better than competition.
We also work closely with our partners in terms of identifying the right corridors, the rates and fees, consumer promotions, campaigns.
For the end-customers, we have a number of benefits. For instance, we don’t charge the back-end. Some of our competitors charge on both the sending and receiving side. We only have one charge from the send-side. Secondly, we don’t charge the cancellation fees. For instance, if you are sending money, but then you come back after a few minutes to cancel, we return the entire amount, both the principal and the fees, whereas some of our competitors only return the principal, and hold the fees.
We also send a text message to the remitter as soon as the beneficiary receives the cash.
Very important, we are the lowest on charges. We have tried to keep our fees as low as possible.
In addition, the use of mobile / technology, for instance, after we introduced Mpesa about 3 years back, our Kenya business has grown tremendously.
Further, our speed of service as 52% of the transactions through Xpress Money can be completed within 60 seconds of execution. That implies the receiver in a different can pick the money even before the remitter has left the outlet. The balance 48% can be collected within 10 minutes, which arises due to compliance requirements.
Finally, we have high level of compliance. We have never had compliance issues.
Question: That leads to the next question. Fees on remittances are always perceived as a barrier in deepening remittances. How are you addressing this issue?
Xpress Money: The global average fee for remittance now stands at 7.5%. At Xpress Money, we are at 2%. This goes to show that we don’t pinch the pockets of our customers. Regardless of the corridor around the world, our fees are very affordable.
Question: How are you incorporating technology in the business?
Xpress Money: We have partnered with the key players in mobile money, for instance Mpesa in Kenya, MTN in Ghana, Telenor in Pakistan, Globe Telecom in the Philippines, and Vodafone Fiji, among others. In these cases, money goes out of the mobile wallet directly and the recipient can use it immediately. This has picked on well in the last few years. For instance, if you look at the Kenyans in the UAE, almost all send money to the mobile wallet. There is hardly anyone making a cash payout transaction or to account. We are seeing a similar trend in other markets.
We are therefore expanding our mobile wallet partners. The plan is to take it to about 25 countries, where money can be put on the mobile wallet.
On the send side, we have a partner called Seamless, which has a platform called SEQR. They are Sweden based company. Transactions generated from the platform can now be paid out through our network.
We are trying to reach out to Telcos, especially for the originator side, where money can originate from the mobile wallet.
Question: And is technology impacting the agents’ business?
Xpress Money: Technology is providing multi-channel approach, and customers now have a wider choice of channels, providing them with convenience. In addition to agents, we have the typical online channel, where one can go to the portal and do remittances. We also have Xopoto, the world’s first social money transfer App. Customers who are on social networks can be connected to do money transfer. The back-end process remains the same.
Question: What is the proportion of Africa market to the business?
Xpress Money: Africa market is about 10% of the business. Overall, Nigeria is the largest at US$21 Billion.
The African market is growing very fast, registering about 25% to 30% year-on-year growth. There are a lot of opportunities, and are connecting a lot of new corridors.
Question: Africa is perceived more of an inbound market (recipient). Do you have any out-bound flow?
Xpress Money: Kenya, Rwanda Uganda and North Africa out-bounds are already taking place.
The intra-Africa corridors are growing. For instance, Kenya to Uganda and vice versa, the overall East Africa community, money is moving within the region. We are expecting a good uptake in the intra-Africa business. The Southern Africa region is also growing with out-bound from South Africa to regional markets / neighboring countries.
Question: What are your main challenges when marketing in Africa?
Xpress Money: One of the biggest challenges is the cost of sending money to and within the continent. It has been expensive corridor, but we have worked hard in the last few years to ensure the cost is low. It is an industry wide challenge, but we are trying very much to keep our costs low, and passing that benefit to the end-users (remitter). A lot of people who previously used informal channels have migrated as the gap (especially in cost) between formal and informal has reduced. Today, operators are willing to offer good deals, rates…etc. There has been a good conversion from informal to formal. We have been educating our customers on the benefits of using formal channels
Secondly, the diversity within the continent is a challenge, and for one to be successful in Africa, you must zoom at the different groups. There is a misconception of Africa as a single market, but is very varied.
Related is the need for having local knowledge, cultural landscape is important, which sometime business may miss out as we are not in every corner of the country, or the continent in general.
Question: How do you address the multiple markets across Africa, which have varied regulatory frameworks?
Xpress Money: We have a franchise model of operations, so we operate with partners in many markets across the continent. We tie up with local money transfer operators, so we may not require a local license. However, when the local regulators require it, we take it.
All in all, our main partners like banks are regulated by the central bank in their respective countries, and they have compliance guidelines.
Question: How does Xpress Money connect with the target customers?
Xpress Money: Customers nowadays are looking out for more customized channels. It is all about network, groups, about community – whether offline or online communities, special interest groups, different nationality groups, it is all about belonging, being part of something. We aim to always bring that sense of belonging; being part of something, especially as an expat one would like to relate with something that connects you with home country.
Across diaspora, we work very closely with communities, special groups, and aim to work with their interest areas, whether it is entertainment like, music, dance; sports elements (football, cricket …etc.), religious groups; groups on overall sense of wellbeing, harmony and good living.
One of the largest elements in our overall mix with these groups is this connection with the consumers. It allows us more intimate conversations with our consumers, which we would not realize if we just had a mass media communication such as TV or radio. We still have mass media as part of the mix, but we engage on ground with our customers.
We also have that engagement through the social media, which is an impactful channel. We apply this either on a global awareness program or if targeting custom groups. This is effective especially in countries where internet penetration is high; we can reach our consumers on digital platforms, on multiple times to achieve expected targeting.
All in all, the recurrence of existing users is fluid. However, we have a loyalty program, from which we see 92% of the African consumers within the loyalty program conduct business with Xpress Money month on month transaction. This is measured on a 30-days cycle.
Question: With such a large audience, how do you effectively reach, manage all these groups and measure your ROI from all of them?
Xpress Money: We have a set of partnerships, which could be banks, exchange houses, non-banking companies, and retail chains…etc. Each of the partners has their own networks that they work with, whether communities, customer groups, or a set of diaspora. This helps us reach to specific groups, and create those targeted messages.
We don’t look at every activity always from an ROI perspective, but mostly from an overall level. Some of these engagements may include social interventions, so it may not always measurable. However, most campaigns, whether global or targeted (micro campaigns), are measurable.
Question: From the mix of channels and use in all these different groups, is there any one channel you can highlight as more effective?
Xpress Money: The objectives of every medium are different. If we use TV or Radio, I want to create that awareness and bring in the numbers. So there is that incremental number that we measure through research. If we want to look at increase in volume of transactions, customer acquisition or conversion, we review the direct channels.
We use direct messaging, like SMS for retaining customers is effective because a customer will always provide the correct number to transact.
So it’s about having an optimal mix for a certain objective.
Question: The African diaspora community is made up of so many groups and sub-groups.
How do you address the cultural nuances / sensitivities in communication with all the different groups, given it’s about money matters?
Xpress Money: Cultural sensitivities are a tough area. We try to be as careful as possible as not to transgress on any group’s sentiments, across diaspora.
We have diverse nationalities working with us, mainly from our main markets. Hence, we usually check with them when we want to run a specific campaign. This helps to check the effectiveness, make a cultural check – that it’s not offending at all, it’s in the right manner, the language, context and tone are appropriate. So when we design a communication, we have to keep such elements in mind.
Question: Do you only target the remitters?
Xpress Money: We target both the remitter and the receiver. A transaction is never complete without both, especially as they are in different markets. In the receiver market, we target visibility. The receiver can then become an influencer as can advise the remitter on the presence of an outlet.
Question: What is the profile of your customers for the African corridor, say from the UAE?
Xpress Money: Mostly in the age between 22 and 50 years, most work within the services industries and money is mostly for family maintenance. A high proportion remits an average of US$200 – US$300 per transaction. Most use the mobile transaction, which has a limit on volume and value of transaction. For instance, for mobile transaction, a Kenyan can send up to US$680 per transaction, and Xpress Money allows up to 5 such transactions within a month.
Question: Where do you find yourself within Africa in the next 5 years?
Xpress Money: We are working with a lot of partners. Collaboration is one of the key areas, which has helped keep our cost very low. We therefore see that a large part of these partnerships will continue in Africa. Africa is now positioned as a key-growth market.
The intra-Africa movement is growing, and we now deepening this, as the volumes are getting healthier. We do a lot of intra-Africa transactions, for instance, South Africa to neighbouring countries, or to Nigeria or Kenya.
In addition, as the continent opens the border, there are a lot of internal migrations within and as this takes place, a lot growth is expected.