How Removing Regulatory Barriers Can Accelerate Growth of Mobile-to-Mobile Transfers in Africa

A partnership between global money transfer giant Western Union and Pan-African FinTech MFS Africa is looking to improve payment integration between Africa and the rest of the world.

The deal, which is also aimed at supporting financial inclusion across the continent, will enable funds to be sent from Western Union clients in 200 countries globally directly to the 400 million-plus mobile money wallets in nearly 40 African countries within the MFS Africa network.

That, and offering users a cheaper and more seamless experience when sending and receiving money transfers directly on their mobile wallets.

Beyond that, MFS Africa Founder and CEO Dare Okoudjou said the deal will unlock access to other financial services, such as helping users create a digital footprint that can facilitate loan applications.

“We expect this [collaboration] to not only continue the trend of digitalization on the continent, but to also help people who rely on money transfers from loved ones in the diaspora to start building financial records for themselves,” he told PYMNTS in an interview.

Read more: Payments Firm MFS Africa Buys US FinTech Global Technology Partners

While the Western Union deal largely focuses on money movement to and from Africa, Okoudjou said the bigger problem remains cross-currency transfers within the region, a challenge further complicated by a deeply fragmented regulatory landscape which he discussed at length in a 2021 interview with PYMNTS.

“The regulatory barriers hampering simple [intra-Africa money transfers] are still there,” Okoudjou said. “It’s still relatively complicated, if not impossible, to move money mobile-to-mobile between Cameroon and Nigeria, the largest money transfer corridor on the continent with over $2.5 billion a year,” he added.

That said, some progress has been made in Francophone West African markets and across East Africa, where he said it is now possible to pick up a phone in Kenya and send money to Tanzania, to Rwanda, to Uganda, to Burundi, and vice versa.

But he said a broader mobile-to-mobile movement across the region is still needed, and will require large markets like Nigeria to fully come on board and enable transfers from the naira denomination to the CFA franc used in Francophone Africa.

“So, compared to where we left it the last time, I think we are making progress, and that’s encouraging. But the pace of that progress is still way too slow and not up to the expectation of traders and business people across the continent that rely on these services,” he argued.

Tapping Into Blockchain Tech

According to data published in a PYMNTS report on cross-border remittances, more consumers turned to virtual currencies in the wake of the pandemic. And those who use cryptocurrency to send cross-border remittances are frequent adopters of mobile wallets, given the convenience of instant payments and the speedy transfer service they provide.

But while there is huge potential in how blockchain technology can transform payments across the continent, Okoudjou said there hasn’t been “the massive adoption that one would have expected by now.”

He acknowledged, however, that it’s quite typical for breakthrough innovations like blockchain “to be underestimated in the long run and overestimated in the short run” and for MFS Africa, the firm finds itself “somewhere in between the two at the moment.”

That said, the Africa-focused firm is embracing blockchain in its own way, he added, and is involved in initiatives that are supporting players in countries where crypto transfers are authorized by regulation for crypto-fiat transfers.

The FinTech company also recently announced a partnership with U.S. crypto giant Ripple to leverage its blockchain-based liquidity solution to drive cross-border real-time payments and bring the benefits of crypto-enabled payments to the continent.

As Okoudjou said: “Necessity is the mother of inventions. There are a lot of things which are necessary in Africa, and because we need to solve those problems, we tend to be more innovative and more forward looking when it comes to exploring the possibilities of these [innovative solutions].”

Bank-FinTech Partnerships

When it comes to bank-FinTech relationships, Okoudjou said collaborations will become the norm and represent one of the biggest segments in terms of the service MFS Africa provides to its clients.

“If you go to a place like Nigeria, we have our point-of-sales network and agency banking solutions, which are essentially an extension of banking services in Nigeria,” he explained.

The firm has also partnered with Pan-African financial institution (FI) Ecobank to help their corporate customers make disbursement and collections from mobile users, while supporting them with card processing solutions.

Overall, Okoudjou said bank-FinTech partnerships thrive if they are launched with the consumer in mind and when they aim to improve payments for entrepreneurs and small businesses looking to expand across the continent.

Against that backdrop, he said FIs that have embraced FinTechs will stand out from those that haven’t. “The future winners in the banking industry will likely be banks that have mastered the art of partnership and know how to build and maintain good FinTech relationships,” he added.

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