International remittances – a portion of earnings that migrant workers send home - are often a financial lifeline to families, especially those living in developing nations. Africa is one of the world’s most important remittance markets, with about USD$77 billion flowing in annually out of a global total of US$666 billion, according to the World Bank. The International Monetary Fund further estimates that 45-65 percent of these transactions are informal, or cash payments.
The COVID-19 pandemic and the attendant closing of borders saw a rising need for alternative cross-border payment solutions. Although the World Bank predicted a steep decline in international remittances due to the crisis, mobile money-enabled remittances have seen little to no negative impact and have, in fact, been more resilient than other channels.
According to a report by GSMA, international remittances sent and received through mobile money increased by 65 percent in 2020, with over USD$1 billion processed via mobile money each month – around 80 percent of which was in sub-Saharan Africa. This is largely due to the rising penetration of smartphones in Africa, which has 171 live mobile money services out of the global 310, lowering barriers for customers and paving the way for mobile money providers to add payment innovations to their offering.
Fintechs have become an integral part of the COVID-19 response in Africa. By partnering with local mobile network operators, banks and governments, they have served the needs of the most financially vulnerable by developing cashless cross-border P2P and P2M mobile payment solutions that provide households with a means to access vital funds. By reducing the need to handle cash, these innovations, such as Ukheshe’s cross-border transfer service boostXB, have allowed informal economies to continue to function, contributing to economic growth and development on the continent. The services enable migrant workers to make payments to families quickly, easily and affordably. Remittances are sent in real-time, which means that the money is available immediately, and customers can transact from anywhere at any time.
The shift to digital payments in a predominantly cash-based economy is connecting the people of Africa like never before and making financial freedom a reality for citizens who have historically been excluded from the formal financial sector.