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Existing tech must bring down cost of African remittances

Africa , 12 Jun 2017

Existing tech must bring down cost of African remittances

Sending money to Africa is more expensive than to anywhere else in the world, according to new report, which argues that existing technology could be used to make sending money to the continent much cheaper.

The report - commissioned by non-profit firm Financial Sector Deepening (FSD) Africa and written by development consultancy Developing Markets Associates (DMA), is to be published at this week's Global Remittance Conference in New York.

It finds that the average cost of sending money to Africa is almost 10% of the total transaction value, compared to the global average of just over 7%, and well above the average price of 3% targeted by the UN Sustainable Development Goals.

While 1.5 million people in the UK are sending over GBP4 billion to Africa each year, 90% of these transactions are carried out using cash and only one in twenty is initiated online. The report argues more needs to be done to ensure existing tech - such as regional automated clearing houses, remittance payment processing hubs and aggregators - is used to bring down costs.

"Sending money home is very expensive, compared to the relatively low incomes of migrant workers and the small amounts they typically send. The real challenges contributing to higher costs of sending money from the UK to Africa are not fixable by new technologies alone," said Leon Isaacs, Chief Executive Officer (CEO) of DMA.

"Instead, we need to focus on scaling existing technology, creating the regulatory environments for those technologies and on changing consumer behaviour to make the sending of money digital from 'end-to-end'."

Juliet Munro, director of Inclusive Finance at FSD Africa, said technology had vast potential to bring down the costs of remittances, with companies such as Awamo, TerraPay and WorldRemit scaling and focused on cutting costs.

"The way we stay in touch, do our shopping, and even the ways in which some of us find love, have all gone digital. Yet, for the vast majority of people sending money home to friends and family in Africa, they are still doing it the way they have always done it: in cash," she said.

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