Iain MacKenzie, Head of Communications   21 August 2015

Man holds a Huawei smartphone showing an MTN mobile money transaction at a kiosk in Kampala, Uganda. Picture credit: Fiona Graham / WorldRemit

Why do some industries get disrupted by the Internet and others don’t?

Usually it is down to two factors: friction and expense — and whether these can be removed without affecting the quality of the product or service.

Take buying music  -  the friction of going to a record store and the expense of paying for a physical CD can be eliminated without reducing your listening pleasure.

Likewise, booking a holiday  -  you can do it online 24/7 and there’s generally a cost saving. However, the physical act of taking a vacation cannot be done over the internet. Nor can exercising at the gym or going out for dinner.

Transferring money is, curiously, only partly evolved. Domestic payments in many countries have progressed to the point where we can wave our phone in the vague direction of a wireless receiver and an instant transaction is made  -  it is literally frictionless.

Yet sending money internationally, for millions of people, still involves plodding to a high street money transfer agent, standing in line to be served, and paying over-the-odds for the privilege.

International money transfers are ripe for the removal of both friction and expense, without detriment to the desired outcome, i.e. moving money from Person A to Person B.

A combination of inertia, powerful incumbents and complexity of regulation means it is only in recent years that things have begun to progress. 

WorldRemit is driving that digitisation of remittances, on both the send and receive side. The majority of senders now use a smartphone rather than a computer and the fastest growing part of our business is transfers to Mobile Money services.

There are more than 260 Mobile Money services worldwide. Source: GSMA

 

It is possible to send an instant transfer to someone’s Mobile Money account in countries such as Kenya, Zimbabwe and the Philippines for as little as £0.95. It requires just a couple of taps on the WorldRemit app, and the money arrives moments later.

So what happens when international money transfers become that low cost, and that frictionless?

People’s behavior starts to change, fundamentally.

In the past, those who used high street agents tended to send larger sums, perhaps once a month, because this offered a modest saving of transactional fees and physical effort.

There may have been a telephone call to confirm that the money was on its way, but with many weeks between transfers, the day-to-day use of their money was less visible to the sender. As a result, an important family support mechanism felt coldly transactional.

With instant transfers to Mobile Money we are seeing people sending smaller amounts, more often. 

Take Kenya as an example  - people who send money for cash pick-up transfer an average of $300 1.8 times per month. Transfers to Mobile Money run at around $160, sent three times per month. And those are averages, many people send much smaller amounts, more often.

This phenomena of frequent, lightweight transactions has led journalists to describe WorldRemit as the 'WhatsApp of money', but the relationship with instant messaging is more than just a metaphor. 

People’s use of WorldRemit is also closely linked to their communication via apps such as Viber and WhatsApp, as well as VOIP calling services like Skype.

A recent WorldRemit customer survey found that 60% of people (who answered a question about their communication preferences) said they used an instant messaging service to discuss their transfer.

The constantly connected, ongoing dialogue allows them to solicit and send money for ad-hoc purposes, such as a meal, extra groceries or a bus journey.

Because of that, senders are more involved in the lives of recipients — they get to see, or hear about, the difference that they are making.

In a Skype interview, WorldRemit customer Stellah Vardling from Uganda described the phenomenon.

“It feels like someone is just next door to you, just in case you need something… it’s not like I have to go to the bank and the bank is going to take seven working days. It’s just the blink of an eye.”

The continued convergence of these innovations is inevitable.

International transfers may never be completely free because there is a finite cost of checking for fraud and other security measures, a cost of moving the money around the world, and the need to provide customer service.

However, people will increasingly come to think of money transfers as an extension of digital communication.

 

We don't support your browser version. To continue using WorldRemit please upgrade to the latest version of: