Category Archives: Western union

Kenyan Remittance from Europe .. as Facebook launches Money Transfers

TransferWise had just launched international money transfers via Facebook messenger chat.

Methods Kenyans use to remit money from Europe

  • TransferWise’s chatbot enables customers to send money to friends and family to and from the United States, Britain, Canada, Australia and Europe from Facebook Messenger.
  • Facebook already allows its users to send money domestically in the United States via its Messenger app, but has not yet launched similar services internationally. TransferWise said its service will be the first to enable international money transfers entirely within Messenger. 
  • One of Europe’s most well-known fintech companies, TransferWise was launched in 2011 by Estonian friends Taavet Hinrikus and Kristo Käärmann out of frustration with the high fees they were being charged by banks for international money transfers.

We did a survey a few weeks ago to see how a handful of Kenyans in Europe send money to Kenya, and asked them to give reasons why they use a particular method.  W hat’s interesting is how rare banks are in the person to person transfer space. We want to expand this further and see how Kenyans in other (European and non-European) countries remit funds.  This was almost Kshs 368 billion (~$3.7 billion of receivables from the rest of the world) in 2015 according  to the Kenya Economic Survey 2016.

 

 

Money Transfer across Africa

From focusing on money transfer in Kenya, where there has been a lot of development and competition especialy in the area of mobile money transfers, it now moves on to what about across Africa? From country to country?

Today in Nairobi Ecobank formally launched their Rapidtransfer which was rolled out in October 2009 is now available in Kenya. With Rapidtransfer one can send money to families members e.g. school fees, pay for goods, send cash to another account in another country, and have the funds available instantly in local currency

An illustration used was for how one can now transfer money from Mombasa Kenya to Dakar Senegal – and with Rapidtransfer, an individual can send a maximum of $10,000 per day (~Kshs 800,000)between the two points on opposite sides of the continent instantly! It is also open to non-account holders and can be used for intra-country transfers as well. The product works only within the Ecobank network, which now covers about 30 countries. They get around the foreign currency restrictions in some countries by making and receiving payments in local currency (no forex exposure to customer) and all at a competitive rate compared to Western Union or Moneygram.

Rapidtransfer was was launched by Kenya’s Central Bank Governor who chided the media for wanting too much from the product already. On whether Rapidtransfer will be on mobile phone, he gave tales about trying to buy a car in 1992 when money would take a week to be transferred from a Nairobi account to a Mombasa account (it was then faster to send money hidden in an Akamba Bus package) and this was also at a time when branches were not linked and one could only transact at a particular branch.

Rapidtransfer is unique in that many because banks don’t talk to each other across border e.g. a bank in Kenya and a bank in Uganda may share the same parent or name but customers who cross borders are not able to transact (except using visa). However, Ecobank customers are also able to use their ATM bank card in all the 30 countries they are present to fully transact across borders.

Mobile phones lower the cost of business

Money Transfer Within Kenya Part 3

A comment from @alykhansatchu on Money transfer lead to an update of the first post about money transfer from about 3 ½ years ago before the advent of mobile money transfers.

At that time, the cost of sending 10,000 shillings (then about $136) within Kenya was Kshs. 1,700 ($23) with Western Union and 1,850 ($25) with Moneygram – working out to a remittance cost of about 17% – 19% for an instant money transfer. This was mostly done at a few commercial bank branches, some foreign exchange bureaus, and at post offices around the country within banking hours.

90% savings: A lot has happened in the last few years mainly in the form of the arrival of money transfers via mobile phones by MPesa from Safaricom and more recently Zap from Zain.

A recent post last week noted that Western Union in Kenya have just lowered transfer costs to flat rates of 2% i.e. almost 88% cheaper than what they were at the time.

In the last few years, millions of Kenyans have moved on to mobile phones for money transfer and I can’t recall anyone who uses banks for these transactions. Mobile phone have maximums of about $430 (35,000 shillings) for money transfers, but this is more than enough to cater for most remittances, including the emergencies that necessitate instant transfers.

And mobiles are still cheaper; the 2% western union charge to transfer 10,000 shillings works out to about 200 shillings. A transfer of the same amount by Zap costs 75 shillings (0.75%) and 105 shillings (1.05%) by M-Pesa (after combining sender and receiver fees)

International remittance to get cheaper?: Zain hope to link Zap to allow transfers to customers of Zain in different African countries. And Safaricom are setting up a link for transfers from the United Kingdom to Kenya. When these are established, we should also see the cost of internal remittances, whose sometime high cost is a cause for complaint for many Africans in the Diaspora, also drop significantly.

Bank Safety Net

and other brief’s

Kenya’s deposit protection fund results are also out. They fund had about Kshs. 18 billion ($240 million) invested in government securities to protect depositors in case one of Kenya’s 45 banks collapses – and pay each account holder up to Kshs. 100,000 (~$1,333). The fund now covers account holders in the two new Shariah banks who were excluded a year ago

Lending crunch? wooing customers
– CFC/Stanbic – win out of the blue; open an account with Kshs. 10,000 and win one of 5 cruises, flat screen TV, digcam, ipods, satellite TV decoders (with subscription)
– Stanchart – take unsecured loan of Kshs. 750,000 or more and get a DVD player
– KCB – spend more than Kshs. 2,500 on your credit cards and you may win a DVD, TV, mobile phones or a holiday

Going regional Equity Bank hiring staff to work in South Sudan, while East African Development Bank is hiring staff to work in Rwanda

Mobile payments Old Mutual customers/fund investors can now pay their monthly subscriptions by M-Pesa – Safaricom’s mobile phone money transfer facility. Banks have already a ceded a significant chunk of the local the money transfer business to mobile phone, who are now expanding into investment and utility payment turf of banks.

Money Transfer within Kenya

I had a situation over the weekend, where I was faced with a choice of having someone send money instantly to me while I was in Eldoret – and this led to a discussion of the cash remittance business in Kenya

Past
Surprisingly, Western Union and Moneygram, which have been recording growing volumes and signing up new banks (like KCB) every month, already represent the past in money remittance. The reason for this is the cost of the transfer, which now puts off savvy consumers. E.g. to send 10,000 shillings to Eldoret, the cost was 1,700 (14.5%) via Western Union and 1,850 (15.6%) via Moneygram.
Transaction time: a few seconds
Cost: about 15% of amount transferred
Convenience: All major towns, available at over 10 bank and dozens of forex bureaus which have extended hours.

Present
With recent investments and advances in IT, banks like Barclays and Standard Chartered are now fully networked, with transactions made instantly reflected in accounts. For cash remittance, I’ll give a friend my Barclays account number, and he’d go to his local Barclays branch, e.g. in Mombasa, or Kisumu, and deposit the money into my account – and I’d be able to withdraw it almost instantly in Eldoret.
Transaction time: a few minutes
Cost: 0 – 500 shillings (depends on withdrawal fees at the bank for over the counter transactions since cash it not always reflected at the ATM)
Convenience: One must have an account with a bank which is networked e.g. Barclays, Standard Chartered, NBK, ABC and the bank should have a branch. But banks have very short working hours usually 9 a.m. – 3 p.m. KCB which has the country’s largest branch system has not networked all its branches yet.

Future
The future will be for money transfer via cellphone, as is already taking place in the Philippines and South Africa. Like MTN, Safaricom and Celtel will one day launch cellphone banking systems to capitalize on the millions of cell phone users, who don’t operate bank accounts, especially in rural areas, where banks have been closing unprofitable branches.
Transaction: a few seconds
Cost: transaction fee to be determined
Convenience: Safaricom and Celtel combined have over 5 million subscribers. Also one can expect market leaders like Western Union and Barclays to capitalise on cell phone banking.