International money transfer service WorldRemit is accusing competitors Western Union and MoneyGram of having duopoly in the money transfer market, especially in Africa, which hinders new entrants and contributes to users paying higher fees to remit money.
In an interview with HumanIPO, WorldRemit chief executive officer (CEO) Ismail Ahmed said the money transfer firms have signed exclusivity agreements with banks in Africa to protect their monopolies from being challenged.
“If a bank seeks to work with an alternative money transfer firm, then the ‘big two’ duopoly will terminate their deals with that bank, effectively shutting them out of the remittance market,” said Ahmed.
He said high fees for consumers resulted as the two firms had almost complete control over the flow of remittances through a corridor and could set fees at almost any level they wish, with Western Union in particular using a complex and opaque pricing model.
The former compliance adviser to the United Nations Remittance Programme said this situation has led to Africans losing out in a number of different ways, with the high costs incurred on transfers not representing fair value based on the typical transaction size, while physically collecting payments from an agent is not viable for some people in rural Africa. Ahmed also said exclusivity agreements stifle innovation.
Ahmed also pointed an accusing finger at some African nations, who he said tolerated the practice of anti-competitiveness. He quoted research from the Agence Francaise de Developpement, the French international development agency, which said in Francophone Africa Western Union holds a 65-100 per cent share of the remittance market. With such extreme market shares, it is almost impossible for new entrants to break through, he said.
He called on regulators and the international community to resolve monopolistic practices.
“There needs to be a concerted effort from the international community to resolve monopolistic practices. Global financial organisations such as the World Bank and International Monetary Fund (IMF) should do their best to lead the agenda, however, real change will be effected when governments and regulators in receive countries work together to break the monopolies,” said Ahmed.
“I would like to see an immediate investigation into the practices of Western Union and MoneyGram. Exposure of their market dominance needs to come from outside of the industry. With the guidance of an independent third party such as the World Bank or IMF, regulators and governments can act accordingly.”
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