For 20 years, Ismail Ahmed had a keen interest in remittances. Once upon a time, his family received remittances. At university level as an economics student, he chose it as a research project not knowing at the time that one day his passion would eventually lead him to set up a global online remittance service that is currently giving banks a ran for their money.
It was seven years ago when the Somaliland born founded World Remit in the United Kingdom and has grown in leaps and bounds, so far providing services to senders in 50 countries spread across the world and offering transfers to 140 destinations. He saw gaps in online transfers and opted to change how things are done.
Mr Ahmed is now profiting from the development of an online platform that makes it convenient for money transfers to be done between people in developing countries and those who are living in developed countries overseas.
The company has taken off especially if figures from the World Bank and the African Development Bank indicating that people from the Diaspora send home around Sh400 billion every year to Africa is anything to go by. According to people a breast with online cash transfers, though, the actual numbers are likely to be significantly higher as a large proportion of funds are usually transferred through various informal means.
In Kenya for instance, World Remit has become rather popular, transacting over $140 million in 2016 compared to $10 million in 2013. This can be attributed to the fact that the company does money transfers through mobile application, which is currently quite popular.
“Most of the other remittance companies are cash based,” says Ahmed. “Henceforth, for one to transfer money they have to go to corner shops, as they have to depend on agents who act as intermediaries.”
Mobile transfer through mobile applications has seemingly given people an easier way than the traditional methods that required one to look for a brick and mortar agent, mostly to far places, in order to receive money. The method by which the recipients receive their cash is also another reason as to why remittances to the country have grown exponentially over the years. Recipients are actually able to get their money either through cash pickup, bank transfer or mobile money. Again, cash pickup is not always safe, sometimes the agents tend to steal from the recipients while bank transfer on the other hand can be expensive and take a long time to go through. As a result, World Remit capitalized on making the transfer more convenient for those who were not content with the two methods.
Looking at the point of mobile penetration around the globe, the online company decided to partner with several mobile money providers in order to reach the large population with mobile phones. In Kenya for example, most of the people do not have bank accounts but they do have access to mobile phones hence they have access to mobile money platforms like M-Pesa. With over 39 million people having a mobile subscription, the company decided to partner with Safaricom Limited in 2013 to tap into this huge potential of mobile subscribers. This saw more and more Kenyans shift from the alternative remittance services like Western Union and MoneyGram, which rely on traditional methods.
“Kenya is famed for leading Africa’s digital transformation, and today its Kenyans abroad who are at the forefront of digitizing international money transfers. Most of our Kenyan customers use our mobile app, demonstrating the strong demand for convenience when sending to friends and family,” says Ahmed.
To him, being in an era where regulations on “Know Your Customer” popular as KYC, and anti money laundering (AML) have been tightened, the traditional methods used, so it seems, are unsecure compared to the digital methods. The latter is able to keep a digital trail of every transaction and thus be able to track any criminal activities if they arise unlike the traditional methods whereby the agents cannot keep track of the many clients they interact with.
In most cases, he argues, a service provider running a mobile money service knows more about its customers than an agent knows about its customers. This also identifies that there is a better customer-producer relationship with digital methods because the client would be transacting directly with the source.
Over the years the population of the world is expected to grow. This is expected to cause the number of immigrants to increase as well, thus leading to an increase in remittances further than their current worth, which stands at $600 billion. In addition, many people are worried about the looming uncertainty in Europe thanks to the wake of Brexit. Despite these dark trends remittances will not be affected much as people will still transfer money.
“Brexit or no Brexit and Trump or no Trump, people will still continue to travel thus this will not affect remittances,” says Ahmed, adding that the number of people getting connected to digital platforms worldwide will lead to the percentage of online remittances increasing from the current 5% to almost 50% in the next 5 years.
This can be collaborated by a report done by McKinsey Global Institute in 2016 which states that the digitization of payments and contribution of platforms like mobile money will also lead to the increase of GDP for emerging markets by $3.7 trillion in the next 10 years, thus making remittances a major lifeline to most people in emerging markets, especially in Africa.
However, the impact of remittances on the African economies has been largely underestimated simply because remittances are a major source of income for many; it helps most people to pay school fees, pay for medical bills or even to assist in businesses and in the property sector.
In fact, remittances are the best form of direct aid as they are three to four times more than international development aid and most of the times the development aid usually ends up to corrupt people’s pockets. This can be attributed to the fact that remittances are hardly affected regardless of their being a natural disaster. It is against the backdrop that Ahmed’s online company has grown to become one of the largest players in the money transfer sector.
Even though the company has so far been expanding in the remittance industry, things have not always been so smooth. Ahmed says: “The biggest challenge for us has been brand awareness and building trust. This is because we have many migrants moving online even though traditionally, African migrants are very conservative… Due to the fact that we do not have a physical presence it becomes difficult to increase awareness to the public. However, due to the ability to raise adequate capital we have been able to gain trust from the people and they are able to use our services.” This story was published on May 4, 2017 by the Nairobi Business Monthly.
