In addition, many African businesses are finding it harder to get access to banking services as banks are tending to shy away from countries where they see more risk and less profits, after a couple of years of massive fines by US regulators on global banks for their global operations. This means that there are less routes to send money to Africa, last year there was a fight to keep the last legitimate banking payment lifeline to Somalia, offered by Barclays, open. Cutting this would have ended many transfers including remittances and aid.
According to a story in Business Day of 16 July, the World Bank, Group of Eight (G-8) and Group of Twenty want the price charged by banks and money transfer operators to send remittances to and from Africa, as well as within the continent, reduced to the G-8 target of 5%, from the average 12.4%. It says that payments technology company Visa is working closely with South Africa’s banks and retailers to open more corridors for consumers to send remittances more cheaply.
ODI said 2 money transfer operators — Western Union and MoneyGram — account for two-thirds of remittance transfers. Remittance prices are even higher between African countries, according to the World Bank.
According to the Business Day report Visa has launched a programme “at a ‘tenth of the price of the traditional players’ using its network connecting banks across 200 countries, to send money from one Visa card to another, Visa sub-Saharan Africa head Mandy Lamb said in Johannesburg on Tuesday.
“Consumers can send money via cellphones, a bank branch, an ATM, internet banking or a point of sale machine at a retailer, in real time. Equity Bank in Kenya was the first sub-Saharan bank to launch the programme last year.
“Visa is certifying some banks and retailers in South Africa to allow them to offer remittances. Some are to start the service between now and the end of year, said Ms Lamb.
“‘In South Africa we have seen a great interest in banks wanting to offer remittance as they have seen the business case … it is lucrative for them and meets the World Bank requirements in terms of bringing down the costs of remittance,’ she said.
“Retailers are also interested in sending and receiving remittances as they have realised it is ‘commercially viable for the lower end of the economy’, said Ms Lamb.
“Visa research estimates that around $73bn was sent via money transfers in sub-Saharan Africa in 2012 and this would grow at double-digit rates to $101bn by 2017.
“This is a substantial opportunity for Visa which benefits from remittance flows, disbursement flows and prepaid cards in the market. By 2017, Nigeria would account for $55.8bn in remittances, Kenya $27.5bn and SA $17.6bn, according to Visa.
“Remittances sent from outside Africa would be the fastest-growing market, expected to amount to $38bn by 2017 — or 27% of the total remittance market. This would be an increase from $19bn in 2012 when this category made up 20% of the total remittance market.”
