Q&A: Dr Ismail Ahmed, CEO, WorldRemit

 

HumanIPO: World remittances have made a shift with the entrance of mobile money and online cash transfer services. How has this changed the remittances landscape?

 

Dr Ahmed: Technology is changing the way that people deal with money around the world, but its effects are most profoundly felt in developing countries. For many people in Africa, a mobile wallet may be the only real financial service that they have access to. Just by owning a phone they now have the ability to receive funds from friends and family around the world. Crucially, they are no longer subject to the high fees charged by traditional money transfer services.

 

WorldRemit has accused rivals MoneyGram and Western Union of entrenching practices that could promote a duopoly in the African market. Please elaborate on this.

 

Western Union and MoneyGram, as some of the first entrants into Africa, have brokered exclusivity agreements with banks in many countries, including Kenya, to ensure their monopolies are not 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.

 

“For example, research from Agence Francaise de Developpement, the French international development agency, has claimed that 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.However, these anti-competitive practices are tolerated in many African nations.

You are on record as saying that there is currently anti-competitiveness and lobbying practices being practiced by the two. Can you justify this?

 

I would point to the recent report by the Africa Progress Panel, chaired by Kofi Annan. It describes the current situation as a “super racket” that levies “indefensible” fees. The panel has called on governments around the world to investigate the practices of money transfer organisations, something I would heartily support.

Lobbying is part of the reason that this continues. In Europe and the United States there are groups that represent the interests of Western Union and MoneyGram. The European Payment Institutions Federation and the Money Services Round Table count Western Union and MoneyGram as members and lobby Western governments on their behalf.”

Have there been any attempts in the past to come together with the two parties so as to implement a working solution for all players in the ecosystem?

 

Western Union and MoneyGram have an interest in maintaining their monopolies. One of WorldRemit’s strengths is the close relationship we have with partners who share our focus on improving access to money for international diaspora communities. In Africa we work closely with mobile wallet businesses such as M-Pesa in Kenya, MTN in Uganda and EcoCash in Zimbabwe to develop a proposition that best serves society.

The cost of money transfer services remains high, with Kenya’s president asking players to come up with tech-based solutions that will help solve this problem. What are you doing at WorldRemit towards this end?

 

WorldRemit provides more ways to send and receive money through mobile or online than any other provider. In addition to the traditional cash pickup and bank deposit options, with WorldRemit, Kenyans can send funds straight to M-Pesa mobile wallets or as airtime top up to networks including Airtel, Safaricom, Orange and yu.

You have called upon regulators to help solve the monopoly issue, do you have a particular body in mind?

 

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.

What are your suggestions for how regulators should deal with money transfer monopolies?

 

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.

In certain remittance corridors, prices are as high as 70 per cent of the total transaction amount. How does this happen?

 

It happens because firms can get away with it. When a money transfer firm has almost complete control over the flow of remittances through a corridor, it can set fees at almost any level it wishes. In the case of Western Union, it uses a complex and opaque pricing model. At WorldRemit we have built a low cost business model with transparent, up-front pricing.

How does this duopoly affect Kenyans and Africa as a whole?

Because of the exclusivity agreements between the money transfer firms and banks, Africans are losing out in a number of different ways. The high costs incurred on transfers do not represent a fair value based on the typical transaction size. Physically collecting payments from an agent is not viable for some people in rural Africa.Also, the exclusivity agreements stifle innovation. M-Pesa has revolutionised the movement of money in Kenya because it relies on a telco operator which does not have an exclusivity deal with one of the market incumbents.

 

Equity Bank recently introduced a new model for cash remittance from the UK to Kenya. What is your take on such models joining the market?

 

Equity Bank is to be commended for adding a new money transfer option for its customers, although their current service only allows transfers from the UK. I think that banks are being forced to innovate because they see their customers moving to low cost, online services such as WorldRemit. However the banks are still slow to change and they are not well positioned to offer the variety of payment options that we do. Depending on the country, WorldRemit customers can chose to send money to mobile wallets, airtime top-up, cash collection or delivery, in addition to bank transfers.

Apart from the partnership with M-Pesa and various banks are we likely to see other partnerships between WorldRemit and players in Kenya?

People use money is so many different ways in the modern world. Our goal at WorldRemit is to give them as many options as possible when receiving money from friends and family. We achieve that by working with a variety of partners including mobile wallet providers and mobile networks. In Kenya we currently offer bank deposit, M-Pesa, mobile airtime top-up cash collection. I have no doubt that there will be more to come in the future.