M-PESA eyes global remittances market’s multi-trillion dollar surge
The African mobile money giant is looking to replicate its African success in new markets as the global demand for seamless, fast and affordable remittance services heats up.
With global remittances set to reach US$5.4 trillion by 2030, according to a specialised UN agency, African fintech darling M-PESA, part of Kenyan mobile operator Safaricom, wants to grab a piece of the pie. The fintech behemoth is ramping up an ambitious expansion drive to woo markets in the global North.
According to the UN’s International Fund for Agricultural Development (IFAD), in the 2021/22 period, remittance flow (US$605 billion) was more than triple the total amount of official international development assistance (US$178.6 billion).
With forecasts showing global money transfer markets will cross the trillion dollar mark as soon as next year, players in this space are now keen to ring-fence their slice of the pie.
According to Aly-Khan Satchu, economist and CEO of the investment advisory firm Rich Management Ltd, M-PESA is effectively targeting a two-way flow with a recently announced partnership with Amazon.
“With respect to inward remittances, I think M-PESA has to look at charges if it is to capture a significant market share and a more sophisticated domestic platform which provides a suite of investment opportunities for inward remittances. Safaricom has the platform and point-to-point advantage and the scale to make this all come together,” he said.
The move into new markets is a natural – and needed – progression for M-PESA, which has already established a strong track record of innovation and growth in Africa.
The platform has made financial services accessible to millions of people who previously lacked access to traditional banking services and has transformed how people in Africa handle their money.
Internationally, however, it will need to first wrestle the lucrative market dominated by traditional players such as Western Union and MoneyGram and banks in new countries.
Already, the virtual banking system run by telecommunications giant Safaricom has limited partnerships with Western Union, Money Gram, World Remit and Remitly, the mobile-first provider of remittances and financial services for immigrants.
Plans are now afoot for M-PESA to split from Safaricom, its giant telecommunications babysitter, allowing it to run as a standalone financial service.
“I think the overall Safaricom share price is now a drag on the M-PESA valuation and that a spin-off will create value for shareholders, attract a new class of international shareholders and allow for efficient capital allocation into M-PESA,” said Satchu.
A divorce from Safaricom would give MPESA more headroom to pursue international ambitions as a fintech service and could allow it to list on new stock markets, expand its fintech service offering globally and solidify its position as a leading player in the rapidly growing international money transfer market.
One strategy for global expansion could be centred around partnerships with local banks and mobile operators, who will help to provide the platform in new markets.
Early in February, Nala, a Tanzanian fintech startup, and M-PESA inked a deal to expand its international money transfer services to the European Union (EU).
Last year, Safaricom and Visa launched the ‘M-PESA GlobalPay’ virtual card that enables customers to use M-PESA to shop at more than 100 million merchants across 200 countries for the first time.
At the same time, M-PESA wants to be the platform of choice for Africans in the diaspora, sending billions back home.
This approach will allow the service to build on its existing expertise and relationships while leveraging the knowledge and resources of local partners to ensure a smooth roll-out.
However, the European market represents a different challenge altogether. With highly developed financial systems and stringent regulations, M-PESA will need to invest heavily in research, development, and marketing to win over customers and convince regulators of the value of its services.
One of the keys to M-PESA’s success will be its ability to adapt to the unique needs and requirements of each market.
For example, in Europe, where many countries have well-established banking systems and high levels of financial literacy, M-PESA will need to emphasise the convenience, security, and speed of its services.
In addition, the company will need to comply with complex regulations, data protection laws, and anti-money laundering requirements to operate in the region.
Another critical factor in M-PESA’s expansion into Europe will be its ability to build strong partnerships with local banks and stakeholders.
This will help the company gain a better understanding of local markets, overcome any regulatory hurdles, and build a network of trusted and loyal customers.
Despite these challenges, M-PESA’s potential to revolutionise European financial services could be immense, especially the payments services.
M-PESA could ride on the trust of Vodafone and Vodacom, Safaricom’s global shareholders to penetrate stubborn European markets. But it will face pushback from banks.
With its innovative technology, extensive network, and proven track record of success, the company is poised to make a big impact in the region and change how people think about money and financial services.
One way that M-PESA could also drive its expansion into new markets is by double-listing on international stock exchanges.
By going public, the company could raise capital and gain access to new investment opportunities, which could help it to grow its operations and expand into new markets.
In addition, listing on a major stock exchange could increase M-PESA’s visibility and credibility, making it easier for the company to attract new customers and build its brand.
Overall, an expansion by M-PESA into new markets can be a game-changer for the company and the financial services industry as a whole.
By leveraging its partnerships with international money transfer services and potentially listing on international stock exchanges, M-PESA could reach new heights and revolutionise financial services worldwide.
