WorldRemit builds bridges to Africa with MTN partnership

WorldRemit has signed a deal with MTN, a move that will enable its customers to transfer money to the South Africa-based telecoms company's mobile payment customers.

The partnership will add MTN's 22m mobile money customers in 16 countries across the continent to the London-based start-up which is targeting the multibillion-dollar market in migrant remittances.

The African remittance market is among the most expensive in the world, with average transfer rates of 12 per cent and excess fees costing the continent $1.8bn a year, according to the Overseas Development Institute, a UK think-tank. WorldRemit, by comparison, takes about 5 per cent slice of transactions.

WorldRemit is one of several tech groups using smartphones and cloud-based technologies to make it cheaper and easier to send money, instead of relying on banks or third parties such as newsagents and corner shops.

The tie-up will help WorldRemit reach "millions of people who don't have bank accounts, giving them access to a variety of life-enhancing financial services including savings and insurance schemes", says Ismail Ahmed, WorldRemit's founder and chief executive.

About $500bn in migrant remittances are sent around the world each year, according to the World Bank - three times the global aid budget.

Until recently, the sector has tended to serve the needs of wealthier western consumers. But a group of "financial technology" start-ups has spotted an opportunity of getting people into the financial system via applications such as money transfer, mobile wallets, new kinds of credit scoring and pre-paid debit cards.

WorldRemit lets people send from more than 50 countries and receive in more than 110, in the form of bank deposits, money in mobile wallets, phone credit or cash. It facilitates about 200,000 transactions a month, and is expanding throughout the US, along with London-based rivals Azimo and TransferWise. Last year the company raised $40m in from venture capitalists including Accel Partners.

Partly thanks to a lack of traditional financial infrastructure, Africa is also pioneering the use of mobile money, such as with the rise of the MPesa scheme in Kenya.

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"The winner will be whoever delivers the sender's money cheapest, with an acceptable level of reliability," says Paul Makin, a mobile money specialist at Consult Hyperion, a UK-based consultancy.

The fact WorldRemit does not run a network of corner shops could help it lower prices but also be a weakness, Mr Makin adds. "Having a high street presence ensures brand recognition and confidence, and being internet-only can make a business aimed primarily at the diaspora - a proportion of whom suffer from limited literacy, at least in English, and limited internet access - more difficult to build," he says.

"Accepting cards over the internet, with instant payout to the recipient, is a notoriously risky business, and will only succeed with strong fraud detection and prevention measures," he adds.

Mr Makin says that while there are a large number of transfer operators that service specific routes - such as UK to Nigeria - and tend to be cheapest for moving money between those two countries, the lack of choice for destinations means "they will never be hugely successful", creating space for more general providers such as WorldRemit.

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