FinTechs Redefine X-Border Payments for African Consumers, SMBs

Remittance corridors that connect African nations to economies in Europe, the Middle East and the U.S. provide a vital lifeline for many individuals moving money across borders.

Now, a new wave of FinTech firms are increasingly challenging the dominance of traditional cross-border transfer solutions like Western Union and Moneygram, looking to help make transfers faster, cheaper and more convenient.

Read more: From Startups to Institutions: Solving X-Border Challenges in Africa to Facilitate Remittance Flows

One area in which newer FinTech firms are bridging value to customers is through tailor-made solutions that recognize the specific needs of economic migrants.

In a recent interview with PYMNTS, Dan Webber, general manager for new products at global FinTech firm Remitly, highlighted how the firm is focusing on serving underbanked populations who might otherwise have trouble accessing financial services.

See also: Remitly on Serving Underbanked Populations and Ensuring Shared Alignment With Partners

“This is a customer [base that] is underserved,” he said. “It’s more difficult to get access to a bank account. Going into [bank] branches and providing this type of documentation is painful.”

Whereas other money transfer services focus on app-based, digital solutions, Remitly enables African migrants to send remittances to mobile money accounts and wallets in over 20 countries across Africa, including MTN, M-Pesa, Airtel, Vodafone and Tigo.

There is also the option for recipients to retrieve funds in cash through partnerships Remitly has inked with banks and post offices in various markets across the region.

Driving B2B X-Border Payments

When it comes to business-to-business (B2B) cross-border payments, the challenges faced by small- to medium-sized businesses (SMBs) in emerging markets, and Africa in particular, differ from those of migrants, yet several of the underlying issues remain the same.

Key among them is the difficulty of making payments to suppliers across multiple currencies belonging to these economies, while minimizing foreign exchange (FX) volatility.

Related: B2B Marketplace VertoFX: From Currency Convertibility to Cross-Border Payments in Emerging Markets

It’s a challenge London-based FinTech VertoFX is helping businesses overcome through its B2B currency exchange marketplace and multicurrency wallet product, which allows SMB clients to convert money from one currency to any of the other 30-plus currencies Verto has on its platform and hold the new currency in their wallet until they are ready to make a payment.

Read more: The B2B Marketplace Fix For FX In Emerging Markets

This means that a client in the U.K., for example, who plans to make a future payment to suppliers in South Africa, Kenya and the U.S. can do so through their virtual wallet, converting British pounds to each of three local currencies and issuing the payments when they are ready to do so.

“That way I remove FX rates risk because I’m able to know right now what the rate is to convert into [South African] rand, Kenyan shillings and U.S. dollars,” VertoFX co-founder and CEO Ola Oyetayo told PYMNTS, adding that the ability to eliminate price and rate uncertainty is why the feature has been very popular with its SMB clients.

See also: Currency Exchange Marketplaces Accelerate Supplier Payments for Emerging Markets SMBs

And, as inflation continues to rise worldwide, the ability to hedge against FX volatility is no doubt a key factor that will contribute to driving business growth in these uncertain economic times.

Sign up here for daily updates on all of PYMNTS’ Europe, Middle East and Africa (EMEA) coverage.