Fintechs Look To Remittances To Drive Mobile Wallet Reach

February 5, 2024
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Revolut is the latest fintech to launch a mobile wallet aimed at streamlining cross-border payments, as remittances drive the adoption of digital payments between smartphones.

Revolut is the latest fintech to launch a mobile wallet aimed at streamlining cross-border payments, as remittances drive the adoption of digital payments between smartphones.

Revolut’s wallet allows users in the UK and the European Economic Area (EEA) to send remittances to bKash wallets in Bangladesh and M-Pesa wallets in Kenya and pay similar fees to its bank transfers. It expects to add other wallet routes in the future.  

The wallet, which is part of Revolut’s growing ambitions to become a financial super app, makes it easier for users to send money abroad quickly using only recipient IDs such as their name and phone number or email address. This reduces the risk of money being sent to the wrong account or being held up in processing at traditional banks. 

Countries such as Kenya and Bangladesh rely heavily on mobile wallets for financial transactions, making the Africa and Asia-Pacific regions key markets for mobile remittances.

"Some of the world's largest inbound remittance markets in the Asia Pacific region — including Greater China, India, the Philippines and Bangladesh — have the highest penetration of digital wallets, making wallets a critical receiving endpoint for cross-border remittance,” according to Shirley Yu, group general manager at Visa Greater China. 

“Wallets are also a crucial conduit for greater financial inclusion to reach populations that may not have access to traditional banking services." 

Visa last year partnered with China’s Tencent Financial Technology to enable WeChat’s more than 1bn users to receive inbound remittances directly to their digital wallets in the app. 

The partnership builds on Visa's collaborations with cross-border payments firms Thunes and TerraPay. It opens up Tencent's ecosystem while meeting compliance requirements, and aims to make sending money as easy as sending a WeChat message. 

Pakistan has recently introduced a “Smartphone for All” project to provide smartphones through instalment plans, which aims to extend the advantages of mobile broadband, particularly to low-income citizens. This is likely to facilitate mobile payments and remittances. Pakistan was the world’s seventh-biggest recipient of remittances in 2023, according to World Bank data

In addition, Umar Saif, Pakistan’s caretaker federal minister for information technology and telecommunications, said in a town hall on January 25 that freelancers in Pakistan working with international clients will be able to receive PayPal payments, addressing long-standing demand.

"While PayPal itself is not coming to Pakistan, an agreement has been reached where remittances would be channelled through PayPal via a third party.” 

Growth since COVID-19

The use of mobile money, particularly for cross-border payments, grew in importance during the COVID-19 pandemic, giving people across low and middle-income countries access to digital financial services and allowing expats to send money home. 

Mobile money-enabled international remittances climbed to $22bn in 2022, up by 28 percent year-on-year, according to a report from the mobile telecom industry body GSM Association (GSMA), an organisation that represents the interests of mobile network operators worldwide.

That followed a 48 percent increase to $16bn in 2021. The habit of using digital payments has stuck, and many first-time users have adopted these services for their everyday needs.

There was a 13 percent year-on-year increase in registered mobile money accounts to 1.6bn in 2022, which was attributed, in part, to regulatory changes in large markets in Sub-Saharan Africa, particularly Nigeria and Ethiopia. In Nigeria, for instance, new licences enabled a 41 percent increase in the number of registered mobile money agents. 

Earlier this month, US-based embedded finance platform provider Alviere partnered with African digital payments network Onafriq to launch embedded remittances and other payment services from the US to Africa. Onafriq connects various payment schemes with more than 500m mobile wallets in its network across Africa’s fast-growing but fragmented payments ecosystem.

Onafriq will use the Alviere HIVE platform and regulatory framework to process payments originating from the US and its territories in compliance with anti-money laundering (AML), sanctions and fraud standards for US financial institutions.

The agreement follows news that mobile money operator Orange Finances Money Mali has partnered with London-based TerraPay to allow its customers to receive money transfers from several countries using TerraPay's global cross-border payments network. The partnership connects more than 12m Malians to the diaspora around the world, including in other African countries that are not well-connected for financial transactions.

Orange Money Mali customers can either cash out the funds they receive in their wallets or directly use them for mobile transactions, including bill payments, supermarket purchases and peer-to-peer transfers.

Meanwhile, Swedish networking and telecom provider Ericsson this month extended its decade-long partnership with African mobile operator MTN to enhance MTN’s Mobile Money (MoMo) service on the Ericsson Wallet Platform. MTN is the region’s largest mobile service provider, with more than 292m customers in 19 markets across Africa and the Middle East.

MTN MoMo customers can securely manage funds, pay merchants and utility providers, and access loans and insurance services through their mobile devices. The platform focuses on the growth of merchant and e-commerce payments, remittance services, and banking and insurance services.

More than 63m active MTN subscribers across 16 African countries use MoM in some form. Annual transaction volumes increased by close to 300 percent from 3.5bn in 2018 to 12.7bn in 2022. 

The Ericsson Wallet Platform meanwhile supports more than 400m registered mobile wallets in 24 countries and processes more than 2.8bn transactions every month through communication service providers and financial institutions, and Ericsson's Mobile Financial Services unit handles one in five global mobile money transactions. 

In the future, it has aggressive plans to reach a 50 percent share of mobile payments in Africa, up from 10 percent currently. 

Cryptocurrency wallet providers also aim to play a role in facilitating low-cost mobile remittances.

For instance, in December, US exchange Coinbase launched a new wallet feature that aims to make transferring money worldwide via cryptocurrency more accessible. 

Users can send USD Coin (USDC), a US dollar-pegged stablecoin, by sharing a link on any platform, including messaging apps, social media apps, and email, with no fees and instant settlement. 

Recipients click on the shared link to download or log in to the Coinbase Wallet app, which is available in more than 170 countries, to receive the funds.

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