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Founded in 2010 by Somali entrepreneur Ismail Ahmed, WorldRemit — a London-based tech startup providing low-cost international money transfers — made headlines a few weeks ago when it raised US$100-million in series B funding.
Having personally experienced the frustrations of using traditional money transfer agents, WorldRemit’s founder Ahmed set out to create a service that would use technology to improve the sending process, enhance compliance and reduce the costs for the customer.
I’m not surprised at all by the success that WorldRemit has achieved, and in my previous article I urged African startups to look at the bigger picture: the opportunity presented by the remittances and international payments market.
Sixty five percent of all remittance pay-out locations are serviced by the two largest traditional money transfer service providers, Western Union and MoneyGram, charging high transaction fees to support their large distribution chains in Africa. This means that new and interesting startups, especially those leveraging mobile in Africa, are finding new ways of providing extensive global and on-the-ground coverage at a fraction of the traditional cost.
However, with the lion’s share of the market, the incumbents are not motivated enough to change the status quo. This is despite the fact that it could put US$4-billion more in the pockets of Africa’s migrants and the families who rely on these remittances for survival.
As a result, tech startups such as WorldRemit, Azimo and Kwanji have come into the spotlight to shake things up and if WorldRemit’s latest funding round is anything to go by, they will be giving the traditional agents a run for their money.
WorldRemit teaches an important lesson about how innovation for the sake of the customer in the developing world can be the making of a successful, global company. One of WorldRemit’s key success factors is their focus on making it easy for the recipients in the developing world to receive money. More specifically, they offer a wide range of receiving options including bank deposit, cash collection, Mobile Money, and mobile airtime top-up. Thereby solving a huge problem for recipients in rural areas where Money Gram and Western Union have limited pay out presence.
Today, more than 50% of all WorldRemit transfers to Africa are received as Mobile Money or mobile airtime top-up. And in January 2015, it announced a partnership with Africa telecoms giant MTN, which will enable transfers to all 16 of the company’s Mobile Money services.
Africa presents a huge number of opportunities for those willing to understand local needs and to innovate in order to find ways of satisfying them. From finance and ecommerce to energy, education and agriculture, the opportunities are immense. If we continue to look at the over US$500-billion remittance market (estimated to reach US$700-million in 2016), there are still plenty of opportunities for innovation in this space.
Another startup that’s been making the headlines is Kenya’s BitPesa, which has raised over US$1-million last month from a US-based backer. The company uses Bitcoin to reduce money transfer fees to the minimum.
This is one of the reasons I set up the Africa Technology Business Network, to inspire UK-based entrepreneurs to create disruptive, innovative, Africa-focused businesses that will unlock the potential of the continent to the benefit of both the UK and African economies.