Technology: Key to enanching remittance in Africa


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  • “In the last few years, very few gadgets have made a bigger impact on the African populace than the mobile phone” .The world’s love affair with the mobile phone shows no sign of abating and via the mobile phone, users can be connected to the benefits of ICT
  • Technology: Key to enanching remittance in Africa

    1. 1. Technology: Key to enhancing Remittance in Africa<br />International Forum on Remittances 2009<br />Session:Role of technology in expanding the frontiers of finance<br />Speaker: Valentine Obi<br />
    2. 2. Content Layout<br />Comments on the “Send Money Home” Report<br />1.<br />Advantages and limitations of New technological frontiers<br />2.<br />eTranzact-eRemit platform<br />3.<br />Conclusion<br />4.<br />
    3. 3. Comments on the Report<br /><ul><li>Integrating advanced technologies such as card, internet or mobile based transfers can strengthen remittances
    4. 4. These models bring funds into the formal financial system and have the potential to impact the economy positively
    5. 5. Need for the Financial institutions to offer attractive services to low-income earning segment of the market
    6. 6. Expanding payment networks to small-scale merchants, MFI’s and Post Offices can strengthen remittances
    7. 7. These groups, however, do not currently have the necessary infrastructure to carry out these tasks effectively even if permitted by regulators
    8. 8. Allowing financiall institutions to pay in foreign currency??
    9. 9. “I prefer to see less punitive exchange rates than payments in foreign exchange, which is vital to African countries, to serve external debts.”
    10. 10. Will create a lot of pressure on an already depressed local currencies
    11. 11. Poor market competition
    12. 12. There is a need to remove exclusivity clauses between MTO’s and FI’s</li></li></ul><li>Statistics of Nigerian market<br /><ul><li>Bank/Western Union model most common for international remittance
    13. 13. Low usage of New technologies for remittances
    14. 14. According to comments made during this forum, most remittances are received as cash
    15. 15. Cash-to-Cash: 80-90%
    16. 16. Receiving via a bank account: 5-7%
    17. 17. To phone/card??? (very low!!)</li></ul>* Statscorp LLC 2006 group survey of cross-section of Nigerians in New York<br />
    18. 18. Traditional MTO transfers, as seen above, is mainly cash to cash and therefore do not help to retain the funds in the formal sector.<br />Technological Innovation, on the other hand, has widened the horizon for remittances and has provided the capability:<br /><ul><li>To remit to bank accounts
    19. 19. To Cards
    20. 20. To mobile phones</li></ul>And thus, has the ability to re-shape the face of the remittance industry and drive down costs of remittances especially in Africa<br />Integrating innovative technology in remittances<br />
    21. 21. Integrating innovative technology in remittances<br />The Mobile opportunity<br /><ul><li>The Nigerian Statistics
    22. 22. Population of 140 million people
    23. 23. 24 million banks accounts in over 49 years
    24. 24. Over 55 million mobile subscribers in about 7 years</li></ul>The Distinction<br /><ul><li>Low entry threshold. Used by the rich and the poor
    25. 25. Anytime, anywhere convenience
    26. 26. Potential tool for financial inclusion </li></ul>Remittances could easily become the killer application in Mobile money services<br />
    27. 27. Trend: use of mobile phones in Nigeria<br />Unfortunately, Use of Mobile phones to access financial services is still a largely untapped service in Nigeria<br />* Efina report: Access to Financial Services, Key Findings of EfInA’s 2008 National Survey<br />
    28. 28. <ul><li>Increases Convenience
    29. 29. For the sender
    30. 30. For the recipient
    31. 31. Cost reduction
    32. 32. eTranzact as a switching platform which has the banks on its platform. By connecting to this platform, MTOs/RSPs are connected to that network. Saves cost of infrastructure deployment for them.
    33. 33. Reduce cost of remittances to Africa
    34. 34. Accurate data collection/reporting tools
    35. 35. Regulators can know true value and volume of remittance flows
    36. 36. Secure
    37. 37. Embracing these technologies will reduce cash handling
    38. 38. Encourages market competition
    39. 39. A level playing field is created for players, which basically will increase innovation on the part of the MTO’s, which eventually reduces cost of operation</li></ul>Advantages of New technologies<br />
    40. 40. Advantages of New technologies<br /><ul><li>Enhances Expansion of Payment Networks
    41. 41. MFIs/ Post Offices can come on-board in a low-cost way
    42. 42. Widens access to remittance service especially to rural people
    43. 43. Strengthens economic opportunity by providing a means to save
    44. 44. Rural poor WANT to have bank account
    45. 45. To keep money safe
    46. 46. To send and receive money safely
    47. 47. Remittance to cards/phones provides the means to store money safely</li></ul>These technological innovations provides access to financial services to the rural poor in a low-cost, secure and convenient manner – serves as an enabler to banking the unbanked in Africa<br />
    48. 48. Limitations to these innovations<br /><ul><li>Regulatory framework for cross-border remittance
    49. 49. Increasingly complex and varies by country
    50. 50. Need to put in place an enabling environment
    51. 51. Lopsided market competition that is against smaller MTOs
    52. 52. Need for partnerships among players to drive interoperability
    53. 53. Exclusivity models should be discouraged
    54. 54. To achieve low costs, competition must be encouraged
    55. 55. Overcoming the literacy barrier in Africa
    56. 56. Need to educate the rural people on use and benefits of these services using effective marketing channels
    57. 57. Requires commitment of the project drivers
    58. 58. Infrastructural challenges:
    59. 59. MFI/Post offices do not have the infrastructure / funds to deploy the needed infrastructure
    60. 60. eTranzact plays a role here to provide such an infrastructure </li></li></ul><li>eTranzact eRemit Platform<br />
    61. 61. About eTranzact<br /> eTranzact is an award winning, innovative and cutting edge technology payment platform. It is a fully Integrated Multi-Channel Switching Platform, Payment ProcessorandMobile Banking / Payment solution. <br /> eTranzact is currently deployed in five African countries (Ghana, Ivory Coast, Nigeria, Zimbabwe and South Africa (WIP)) and aggressive plan is in place to deploy the platform across the various African countries at the shortest time possible.<br />There are currently over 35 banks and 15 MFI’s connected to the platform. Also, there are over 60 MTO’s on the network at the moment.<br />
    62. 62. eTranzact-eRemit Architecture<br />Pre-paid Card<br />Mobile phone<br />Bank account and Cash Outlet<br />eTranzact-eRemit platform<br />Remittance Organization<br />Recipient<br />Sender<br />
    63. 63. Boosting remittance levels is made easier using the eTranzact-eRemit platform<br />A STRONG SWITCHING PLATFORM<br />AN ESTABLISHED NETWORK OF BANKS<br />EASY FOR AN MTO TO <br />‘PLUG IN & PLAY ‘<br />CONVENIENCE FOR SENDER & RECEIVER<br />Multiple collection points to drive usage.<br />Remit to Bank Account<br />Remit to <br />Card<br />Remit to Phone<br />Remit to <br />Cash Outlet<br />
    64. 64. eTranzact-eRemit Features<br />
    65. 65. Conclusion<br />Technology plays a key role in boosting remittance levels in developing countries because the use of innovative technology in remittance services enhances:<br />Savings <br /><ul><li>Especially valuable to the currently ‘unbanked’ market</li></ul>Reduces cost across the entire value chain<br /><ul><li>Lower costs to deploy service translates to lower fees
    66. 66. Needed in these times of financial crisis</li></ul>Convenience<br /><ul><li>Using an every day tool for your everyday transactions</li></li></ul><li>“Remittances provide a lifeline to many poor countries. Although they remain resilient, even a small decline of 7 or 10 percent can pose significant hardships to the people and to governments, especially those facing external financing gaps. Reducing remittance fees and developing innovative tools to leverage remittances for financial inclusion and capital market access should be a part of our response to the financial crisis.” <br />- DilipRatha, Lead Economist in the Development Prospects Group of the World Bank, on the impact of the financial crisis on remittance levels.<br />
    67. 67. Thank You<br />