The United Nations and European Union are backing two private sector fintechs working to bring down the cost of remittances in Southern Africa.
The UN’s International Fund for Agricultural Development (IFAD) and the EU fund the Platform for Remittances, Investments and Migrants Entrepreneurship in Africa (PRIME Africa).
PRIME says that migrant workers in Southern Africa do not have the usual documentation required by formal remittances service providers through their know-your-customer systems, leading to the dominance of informal channels in the money transfer process.
Digital channels and increased market competition can lead to an additional $5 billion per year being received by families of migrant workers in Africa, says PRIME.
In an effort to build effective and efficient payment infrastructure for low-value remittances in Southern Africa, the initiative is working with South African firms BankservAfrica and Mama Money.
Bank-backed BankservAfrica is implementation an interoperable, low-value and instant payment scheme for remittances called Transactions Cleared on an Immediate Basis (TCIB). The scheme provides a multi-currency settlement platform to reduce remittance’s settlement time, foreign exchange risk and transfer cost.
Ruhling Herbst, executive, Africa business development, BankservAfrica, says: “By opening up the market to more players on an interoperable platform, this payment system enables both banks and non-banks (such as money transfer operators, or fintechs) to access regional cross border payment infrastructure.”
Francesco Rispoli, country director and head of IFAD’s Southern Africa multi-country office, adds: "Improvements in remittance services will significantly enhance the lives and financial well-being of migrant workers in South Africa and their families in the region."