Foreign Exchange on the Frontier
In sub-Saharan Africa, 75% of the population does not have a bank account. Many use mobile apps in lieu of traditional bank accounts. For Africans, transferring cash through a bank or a Money Transfer Operator (MTOs) like Western Union or MoneyGram can be costly. While there is much opportunity in Africa, it can be difficult for companies outside of Africa to work with people and businesses across the continent. Payments are both costly and unreliable, due to:
- Liquidity challenges of African currencies
- Reliance on physical cash Foreign Exchange bureaus and brokers
- Slow, expensive settlement of international transfers from African banks
- Global banks with limited experience partnering with emerging banks
- Limited use of credit card systems and other channels such as PayPal
According to the Overseas Development Institute, the average charge to transfer $200 to Africa using traditional money transfer services is 12%. If you send $200, you pay $24. The ODI added up all the transfers that happen in a
year, and found remittance fees cost the African continent $1.8 billion a year.
Ease of use is critical to adoption. In Africa, even when a bank has expensive technology, the bank cannot always integrate it. Elizabeth Rossielo, founder of Bitpesa, has first hand experience with this challenge.
