A study on use of financial technology (fintech) shows charges for United Kingdom remittances are far cheaper when digitally executed than in cash-to-cash transfers via agencies.
The study by Financial Sector Deepening (FSD-Africa) says fintech companies operating outside the financial sector regime have introduced innovative products that have made Kenya the cheapest destination for money sent from the UK.
“Transactions either initiated or terminated digitally are on average more competitively priced than cash-based remittance services, averaging 7.8 per cent in first quarter 2017 compared with 10.7 per cent for cash-to-cash services. There are encouraging signs that where technology is being used for remittances, prices are reducing,” it says.
The UK-Kenya cash transfer regime further benefits from a conducive and flexible regulatory regime on fintech in Kenya that has seen British remittances increase to Sh523 million last year, helping improve livelihoods and boost investments.
The study, titled ‘‘Reducing Costs and Scaling Up UK to Africa Remittances Through Technology,’’ hails Kenya as the cheapest destination to send money where it costs one four per cent on any amount sent compared to its closest rival Zimbabwe, which charges seven per cent.
It says Kenya’s ‘bold’ move of allowing telcos into the money business has helped spur competition on money transfer pricing enabling foreign money senders to partner with local banks and telcos in the money transfer business.
Recipients then receive prompt remittance text messages on their mobile phones enabling immediate use of the money for the intended purpose.
The report urges for adoption of biometric and other digital identification technologies in Africa saying this could help reduce costs of sending money from UK to any African country that has adopted the technology.
It adds that using online platforms could help lower the charges further since it will cut on intermediaries thereby helping African countries benefit more from the remittances.
“Mobile phone technology, mobile money, digital currencies, distributed ledgers, electronic identification and cloud technology together have the capacity for the first time to technically make cross-border payments negligible in cost, instant, auditable and accessible to everyone at their fingertips,” it observes.
Currently, Kenyans enjoy UK direct-to-bank transfers as well as to mobile money account transfers.