Mobile financial services continue to grow dramatically in Africa. The number of mobile money wallets has surpassed that of bank accounts in major East African markets including Kenya, Tanzania and Uganda. For example, the Central Bank of Kenya reported 23.75 million registered mobile money accounts by June 2013, compared to only 18.9 million bank accounts.
As take-up of mobile money services grows, cross-border money transfer services are emerging as the next opportunity for operators and other mobile financial players. The extended geographical coverage of domestic mobile money services, the growing number of customers with access to mobile money accounts, and the extension of money access points to include ATMs and mobile wallets as well as agents in many countries, are all enabling factors for cross-border remittance services. To this end, operators are forming partnerships with financial institutions or international remittance companies, and using their multi-country mobile money networks, to develop such services.
This article discusses business models for mobile cross-border remittance services in Africa, growth drivers and opportunities for market players.
Cross-border mobile money services are delivered through different business models and partnerships
The most prevalent business models for providing mobile international remittance services in Africa are as follows.
- Operator-to-third-party. This involves partnership between an operator and an international remittance provider or financial institution. Users send money to another country via, for example, Western Union, and recipients receive it in their mobile wallets (or alternatively collect it from the local Western Union agent). This is the most common type of mobile remittance business model (see Figure 1).
- Intra-operator. Customers of the operator in one country can transfer money, using an existing mobile money account, to a customer of the same operator in another country.
- Millicom pioneered a cross-border mobile money remittance service in February 2014 between Tigo Tanzania and Tigo Rwanda. Remittances can be collected from a Tigo agent, or go into recipients' Tigo mobile wallets.
- Inter-operator. This involves co-operation between different operators, enabling them to reach countries that are outside their footprints.
- In April 2014, Bharti Airtel and MTN agreed to partner to provide an international remittance service between Burkina Faso and Côte d'Ivoire. Airtel customers in Burkina Faso can send money to MTN customers in Côte d'Ivoire, and vice versa. Money is collected from the receiving operator's agent, or put into the recipient's mobile wallet with the receiving operator.
Country coverage (and models) of major African international mobile remittance partnerships are shown below.
Figure 1: Cross-border mobile money remittance services involving mobile network operators, selected countries, Africa [Source: Analysys Mason, 2014]
![Cross-border mobile money remittance services involving mobile network operators, selected countries, Africa [Source: Analysys Mason, 2014]](http://www.analysysmason.com/PageFiles/47040/africa.png)
Africa had 23 operator-led cross-border mobile money transfer initiatives by mid-2014 – 9 in East Africa, 7 in West Africa, 5 in Southern Africa, 1 in Central Africa and 1 in North Africa. Partnering with an international financial institution is still the most common approach, because such players have established regulatory permission for cross-border money transfer, and have a commercial presence in many countries. Figure 2 highlights selected partnerships between mobile operators and third-party remittance providers.
Figure 2: Selected cross-border remittance partnerships by mobile network operator, Africa [Source: Analysys Mason, 2014]
| Operator | Partner (country) |
| Bharti Airtel |
|
| MTN |
|
| Orange |
|
| Telecel |
|
| Vodafone |
|
Economic and sociocultural factors are driving the take-up of cross-border mobile money transfer services
Demand for cross-border money transfer services in Africa is driven by:
- commercial requirements of the informal trade sector
- cultural and economic affiliation between African countries
- large and mobile African population.
Africa's economy is heavily driven by the informal sector . In 2013, this sector contributed 55% of Sub-Saharan Africa's GDP and accounted for 80% of its labour force. Transactions in this sector take place outside of the formal economic and financial services system. They often involve the use of risky informal channels to transfer money across borders.
Cross-border mobile money transfer services enable the informal sector to participate in the formal financial system and avoid opening a bank account, which typically requires more extensive documentation (for example, proof of residence) than registering with a mobile operator. Mobile money provides a safer, quicker, and often less expensive, alternative for cross-border money transfers.
Demand for cross-border remittances is also driven by regional integration, particularly in East and West Africa where regional agreements promote cross-border trade and monetary integration. Significant movement of African labour across borders, to seek higher wages and new employment opportunities (especially within regional 'blocs'), also creates a mobile population, driving demand for mobile remittance services.
New opportunities will centre on inter- and intra-operator partnerships, and regional expansion
Cross-border international monetary transfer is an opportunity for operators and their mobile money partners, as domestic money services reach critical mass. More initiatives will emerge in the coming year in Africa, with growing focus on inter-operator and intra-operator remittance services.
Remittance partnerships provide operators with opportunities to expand services to countries where they do not have a physical presence, and to strengthen offerings in those that they do. Ultimately (subject to regulatory constraints), operators may have opportunities to acquire remittance companies in order to increase capabilities in this area.
From a geographical perspective, opportunities exist to extend cross-border remittance services to countries with significant intra-regional trade but which are underserved by international mobile remittance services (for example, the Central Africa region), particularly where domestic mobile money take-up is strong.
Mobile operators may extend internationally beyond remittance services, integrating mobile payment systems and mobile wallets across countries, to provide full international financial services.
Source: Analysys Mason
