African migrants who send money to their home country pay huge remittance fees to money transfer operators. Remittances for Africans feel more like an extra income tax they have to incur when sending money to their family, paying the price of poor competition between the two money transfer operator giants on African land, namely the Western Union and MoneyGram.

Africans pay the most according to the World Bank

The World Bank recorded a whopping 38 billion pounds sent as remittances in 2012 by African migrants to their countries. In fact, Africans lose as much as 12{8b3f73219b5080a422b1f04099b73d538078b62721cecdfd0086dbdff3438969} on remittance fees when they move money to their home soil. Surprisingly, when moving money between African countries, the fees are outrageously higher, costing an average of 22{8b3f73219b5080a422b1f04099b73d538078b62721cecdfd0086dbdff3438969} on the sum they are sending. For example, if someone is transferring 100 pounds from Kenya to Tanzania, they have to pay at least 22 pounds in remittances.

Michael Clemens qualifies the situation as horrifying

According to the Centre for Global Development’s Michael Clemens, a Washington-based thinktank, the situation is more than alarming. The percentage fee on remittances shouldn’t “be more than 2,3 or 4{8b3f73219b5080a422b1f04099b73d538078b62721cecdfd0086dbdff3438969}”. African migrants are unjustly being taxed and there is “no doubt about it”. In fact, the Centre for Global Development has been aiming at reducing global poverty and inequality by fostering change on the policies and practices of rich countries and powerful institutions.

Money transfer to Africa has known a slow revolution

It is only in the 1990’s that the Western Union started providing money transfer solutions to Africans. Before that, money was hand-carried in envelopes by relatives or friends travelling to their homeland. Many hard-working Africans had to put their hard-earned months’, and sometimes years’, savings in the hands of someone they didn’t completely trust. And, there was always the possibility of the money being lost or stolen during the long voyage between continents.

Western Union is a giant when it comes to the remittance market

Old players like Western Union have dominated the money transfer field for far too long, with approximately 500,000 outlets in at least 200 different countries, including Africa. Since it is the largest provider of international money transfers, Western Union makes billions in remittance fees every year. Around 80{8b3f73219b5080a422b1f04099b73d538078b62721cecdfd0086dbdff3438969} of their revenue alone is from remittances. In countries like Mali and Rwanda, they have acquired almost 70{8b3f73219b5080a422b1f04099b73d538078b62721cecdfd0086dbdff3438969} of market shares with the assistance of banks and other financial institutions.

Smartphone can rapidly reverse the situation

With the rising number of smartphone users on the African continent, sending money can become a lot easier and simpler for African migrants. Social payments can be the solution for Africans to send money to their friends and relatives with a simple click of the button or swipe on the screen of their mobile phones. Modern social payment apps can be the ideal solution for sending a couple of pounds to pay for your sibling’s education, medical bills and other urgent expenses.

Social payment can make life easier for Africans

Social payment makes it easier for sharing and splitting expenses between friends and relatives. Be it sending or receiving money, it is the smart association of social media features combined with monetary transactions. Armed only with a smartphone, you can share ticket costs with friends, transfer money to their bank accounts and make online payments, all through a social media app. For African migrants, it is the perfect method of sending money home without the high costs that traditional money transfer operators impose on them.

Mobile payments are faster, cheaper and more convenient

Mobile payments can ease-out the many friction points posed by traditional money transfer with the added remittance fees. With this new solution, no need to queue at local remittance centres and fill out forms before receiving and transferring money. It makes the whole process hassle-free, fast and much less expensive. Also, no need to carry huge amounts of cash around and fall prey to mugging and other criminal activities.

Mobile payments can create opportunities for other businesses

Mobile payment methods like social payment apps can pave the way for progress in the African region. It could create opportunities for businesses by encouraging users to pay via their mobile phones instead of going to the ATM every now and then for withdrawals to settle bills. Grocery stores, supermarkets and even clothes shops can benefit from this innovative method of payment.

Financial institutions in Africa should partner with mobile payment companies

Africans have been paying huge remittance fees for too long now. It is high time for banks and other financial institutions to break the hegemony of traditional money transfer giants and partner with mobile payment companies for the betterment of the African population. The way to progress and economic development in Africa lye in adopting new technologies and a modern payment method.