Financial

WorldRemit plans massive African expansion

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WorldRemit aims to capture 30% market share in SA over the next three years.
WorldRemit aims to capture 30% market share in SA over the next three years.

Digital money transfer service, WorldRemit, has lofty ambitions for its growing business in South Africa and major expansion plans for other African countries.

The company yesterday announced it is now providing its low-cost digital money transfer service from SA to over 150 destinations worldwide. It has been allowing overseas users to send money to SA since 2011, but now South Africans can also send money out of the country using the WorldRemit app or Web site.

South Africa is only the second country in Africa where WorldRemit enables money to be sent from, whereas over 40 African countries can receive money via the digital platform.

"Globally, the remittance industry is valued at about $600 billion [per year]; that is not business payments or corporate payments, it is individuals sending money to individuals," Andrew Stewart, WorldRemit MD for Middle East and Africa, told journalists in Johannesburg.

"In an African context it's valued at about $65 billion. That is the African diaspora that are living and working abroad and sending money back home to family and friends, and that has grown at about 27% on an annualised basis. In the South African context, in terms of outflow, people living and working in SA and sending money out of the country is worth about $2.4 billion and money flowing into SA is worth about $2 billion," he said.

SA ambitions

"We are pretty ambitious, so over the next three years I would like to capture 30% of the $2.4 billion volume flowing out of SA. We know there are about 3.2 million diaspora living in SA; about 30% of them are banked so we are going to go after that segment," Stewart told ITWeb in an interview.

"I would like to be number one in SA. But it's very competitive, with guys like Mukuru, Mama Money, which are excellent companies and have done a phenomenal job, but I think our service and our user experience is a real draw card for us. So I would like to have, over the next three years, at least 30% market share," he said of the South African business.

"I think SA is ripe at the moment, in terms of the adoption of smartphones and the movement to digital, not just in our industry but more broadly. So I think it's the right time [to launch in SA]."

The company has been planning the South African expansion for some time, and has been incorporated in SA since 2017, but it took almost two years to get a licence to operate in SA from the South African Reserve Bank (SARB).

"South Africa has always been on the cards, but it's just been a long journey to convince the regulator because the model is different, so it took us a bit of time to walk through with the regulator because we are truly a digital player on the send side."

The main issue was that WorldRemit's verification process relies on a KYC (Know Your Customer) process that is all digital. To verify their identity, users must upload a picture of their passport, identity document or driver's licence to the Web site. They then uploaded a picture of themselves and the company verifies they match using facial recognition software and other tech.

"[The SARB] understood the traditional model where people would walk in with cash, fill in a form, be physically verified. So it took us a while but I think the SARB is quite progressive in terms of its outlook to try and move to a digital ecosystem," Stewart explained.

Andrew Stewart, WorldRemit MD for Middle East and Africa.
Andrew Stewart, WorldRemit MD for Middle East and Africa.

Conquering Africa

WorldRemit already allows money to flow into Africa but has big plans to expand its business on the continent, so that local users can send money through the platform as well. South Africa is the second country in Africa where the company has launched its send service, following Somaliland eight months ago.

"That was our pilot; it was just a lot quicker from a regulator perspective to get a licence and it's going really well so far. Our founder [Ismail Ahmed] is a Somalilander so that was the priority, to be honest. We felt Somaliland would be a really great test bed for us. Actually it's a slightly different market as we are targeting SMEs there."

Next on the launch list is Rwanda, followed by Uganda, Tanzania and Kenya. He said the second phase of expansion will focus on West Africa and the company already has a licence in Zimbabwe.

He added that the current Internet shutdown in Zimbabwe is a worry.

"We are concerned; the Internet is down, banks are shut but our international customers can still send money. The transactions will be pended and held until such time that our partners are open for business again. If customers don't want to go through with the transaction they can get a full refund. Unfortunately, it's a bit of a wait-and-see situation at the moment in Zimbabwe but we are still very much open for business."

Financial inclusion

The company traditionally focuses on customers who are already banked in some form because the whole platform is digital, which keeps costs down for users. Bank accounts, credit and debit cards are the most usual way for transactions to be funded; however, in Africa, Stewart acknowledges that a lack of financial inclusion could call for other options.

He said it is estimated that about 80% of South Africans are already banked and while the company plans to focus its expansion primarily on markets where there is already "quite significant inroads in financial inclusion", this may not be traditional banks but could also be mobile money.

"If we do not have partnerships with mobile money providers we will struggle. So that is important for us."

When asked whether it's problematic that the company is leaving out the large unbanked sector in Africa, he agreed that it is.

"The challenge for us is that we don't deal with cash, nor do the regulators want us to deal with cash, that is why our licences are predicated on digital.

"We are looking at other alternative, creative ways but I think it's a little bit down the road. So, for example, we could partner with an institution that offers prepaid. So they might not be physically banked but we could offer them a prepaid top-up proposition. That's the thinking for some other African countries."

He pointed out that for most African countries, receiving money via remittance is more important than sending.

"If you look at a net inflow-outflow, Africa is a net receiver. But Africa is still big; we estimate that formal outflows or intra-flows is about $14 billion, but if you look at the informal it would probably be about $140 billion. But people receiving into Africa is about $64 billion formal and informal probably $200 billion so it's always going to be a net inflow region," he concluded.

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