Till about two decades ago, remittance services offered by money transfer players and banks, were limited to Cash and Account payouts only. The internet boom in the early 2000s, transformed the industry, that was soon introduced to the world of online money transfer, card payments and other such innovations, that left the customer with an array of remittance services to choose from.
As one would assume that the remittance industry may have reached its brink, a new and advanced mode of money transfers – mobile money transfers, came into existence. With the rapid penetration of mobiles, even in rural areas, what was originally just a communication device, was soon transformed into a convenient tool for payments in many countries, across the world. Mobile wallets are fast gaining popularity, especially in countries where a large percentage of the population does not have access to banks or basic banking services.
In sub-Saharan Africa, for example, only 24% of adults have a bank account, on the contrary, mobile phone penetration is rapidly increasing and is expected to reach79 percent by 2020. Owing to this fact, one can comfortably say that Africa is the fastest growing mobile money market in the world.
M-Pesa, launched in 2007, by Safaricom in Kenya, is a noteworthy example of how mobile wallets changed the remittance game in the country. Taking M-Pesa as an example, a host of other African countries, soon introduced mobile wallet services with different services providers such as MTN, Airtel, Tigo and Orange Money, to name a few. Not only does a wider section of society have access to their money on mobile, but the cost of sending remittances to Africa has also drastically reduced.
The World Bank reported that Africa could receive USD $4 billion additionally, if international remittance fees fell to 5% ; the increasing use of mobile wallets can help Africans achieve this number and enjoy greater amounts of remittances at their disposal.
Similarly, other developing countries such as the Philippines, India, Pakistan, Mexico, Argentina, Venezuela, Peru, the Dominican Republic, Haiti etc. have also followed suit and introduced mobile wallet services to reduce costs and make money transfers very convenient for customers. This service works totally in favor of customers as the money transferred onto the mobile wallets can be used for person to person transfer, bill payments, shopping or cash can be withdrawn from the service provider’s location in the country.
According to the World Bank, the value of international remittances through mobile phones accounted for less than 2 percent ($10 billion) of the global remittance flows ($542 billion) in 2013. This value is sure to grow over the next few years with the increasing impetus being given to mobile wallet services across different countries to boost remittances and decrease costs.