Remittances and cross-border payments in Kenya and Africa are undergoing a significant transformation, making them one of the fastest-growing areas of financial services.
With advancements in digital platforms, infrastructure, and mobile technology, it is now possible to send as little as $1 (Sh129) to Kenya in under 20 seconds from anywhere in the world via a mobile phone.
This marks a stark contrast to traditional methods, where one had to physically withdraw cash, visit a remittance service provider such as Western Union, obtain a transaction code, and relay it to the beneficiary.
The recipient, in turn, had to travel from their rural village to the nearest town with identification and the code to withdraw their funds— a process that could take days.
Today, digital platforms enable instant transfers directly into mobile wallets, drastically reducing time and effort.
This digital revolution is crucial in realising Kenya’s ambitious goal of increasing remittances from nearly $500 billion (Sh65 trillion) in 2024 to $1 trillion (Sh129 trillion) by 2027, as envisioned by the State Department for Diaspora Affairs.
The 2020 G20 Financial Inclusion Action Plan (FIAP) reaffirmed a commitment to reducing the global average cost of remittances to below 3 percent by 2030, aligning with the Sustainable Development Goals (SDGs).
By the end of 2023, over 200 million migrants were projected to send an estimated $656 billion (Sh85 trillion) in remittances to at least 800 million people in low- and middle-income countries (LMICs). These inflows are vital for economic stability and financial inclusion, particularly for vulnerable populations.
Digitalisation has proven to be a transformative force in reducing remittance costs, improving efficiency, and expanding access to financial services. Digital remittances are significantly cheaper than traditional cash-based services. The average cost of sending $200 (Sh25,850) digitally is approximately 4.60 percent, compared to 6.89 percent for cash-based transactions.
Mobile-to-mobile transfers offer even lower costs at 4.11 percent.
Digital transactions are faster, more secure, and easily trackable, increasing user confidence.
Remittances often serve as a gateway into formal financial systems for migrants and their families. This fosters the development of tailored financial products, particularly benefiting women, who constitute a significant portion of remittance senders and receivers.
Women, in particular, gain significant advantages from digital remittances. The privacy and autonomy provided by mobile money empower them to manage funds independently and allocate resources toward essential household needs, ultimately lifting families out of poverty.
By integrating remittances into financial services such as savings accounts, insurance, and credit, digitalisation can further enhance economic empowerment and stability.
Despite its potential, the success of digital remittances depends on strong financial and digital infrastructure, including internet access, mobile phone penetration, and financial access points.
Sub-Saharan Africa faces considerable challenges in these areas. Additionally, seamless interoperability between domestic and regional payment systems is critical for creating cost-effective and efficient cross-border payment solutions.
While digitalization presents immense opportunities, it also introduces risks such as cyber threats, data security concerns, and the need for updated regulatory frameworks to govern emerging business models and new Remittance Service Providers (RSPs).
Effective governance, oversight, and collaboration between financial regulators and service providers are essential to fostering innovation while mitigating risks.
Digitalisation is a game-changer in advancing financial inclusion, reducing remittance costs, and empowering underserved populations. By adopting best practices, enhancing infrastructure, and addressing regulatory gaps, stakeholders can unlock the full potential of digital remittances, driving inclusive economic growth.
At Wapi Pay, we are proud to witness firsthand the transformative effects of digital remittances.
In 2024 alone, we have processed over Sh50 billion in transactions, with a strong vision to scale this to Sh500 billion through strategic partnerships, improved interoperability, and compliant transparency.
The future of remittances in Kenya is digital, and we are committed to leading this revolution.
The writer is Co-Founder and CEO, Wapi Pay
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