Migration spurs mobile money remittances in Sub Saharan Africa, report
Market Sub-Saharan Africa (SSA) is witnessing a surge migration within the region and to other parts of the world such as North America and Europe.
As a continent, Africa had a net migration population of over 11 million in 2015, predominantly economic migration. This has been instrumental in the growing volume of international remittances flowing into the region, as migrant workers transfer money to family members in their countries of origin.
International money transfers were estimated to be $33 billion in 2016 and were expected to grow by 3.9% over the period 2016-2021, to reach $39.9 billion in 2021. Mainstream money transfer operators (MTOs) such as MoneyGram and Western Union dominate the market for international remittances across Africa. Due to their high service cost, consumers have also relied on informal channels, estimated to make up 75% of the total volume of remittances.
The growing adoption of mobile money services has seen consumers increasingly turn to mobile money for their remittances, largely due to their relative convenience and affordability compared to the services of mainstream MTOs. It is estimated that 2.6% of the remittances in 2016 flowed through mobile money wallets, primarily in East African and West African markets, which have a greater uptake of mobile money services.
By 2021, mobile money wallets will account for 4.5% of the total value of international remittances. The Reportlinker study focuses on the current structure of tower ownership between mobile network operators (MNOs) and towercos and how this is expected to evolve over the long term. The report also provides an overview of the current and expected base of mobile towers in the region, highlighting potential opportunities in the market and competitive structure across selected countries.
Mobile network operators (MNOs) will need to consider partnerships with clearing and settlement platform providers such as TerraPay in order to drive the use of mobile money-based remittances.
MNOs with a large SSA footprint should consider creating remittance corridors in the region by enabling international transfers across the operations in which they have a presence as a way to enter the market.
MTOs face the growing risk of being dis-intermediated by the MNOs' mobile money wallets, and will need to consider either partnerships with Fintechs or leveraging technology in order to make their services more affordable.
At a cost of 11.2% of the transaction value, banks continue to be the most expensive channel to send remittances. Processing remittances through mobile money wallets is by far the cheapest option available to consumers at just over a quarter of the cost charged by the banks.
