Money Transfer Operators' price competition – an advantage to their customers?

Over the past decade, the importance of money transfer flows between African countries and the rest of the world has received widespread attention from the media, governments, development agencies and the private sector. This attention, and especially the quantity of money transfer flows, has brought greater competition and the adoption of new technologies such as Money Transfer Operators (MTOs). Together these factors have contributed to sharply lowering the cost of sending money.

In Africa, there are many MTOs such as Western Union, MoneyGram, Money Express, Dahabshiil etc. According to  research published by the Overseas Development Institute (ODI) in April 2014, Western Union and MoneyGram control about 50% of the money transfer market in Africa. Most African banks sign exclusivity agreements with these two MTOs, however these transfer services have higher rates than other smaller firms and this has led to banks becoming less competitive.

Why its a Cleanleap

Here in Rwanda, we have an integrated payment processing system  to reduce the time lag in payments and notably to mitigate the systemic risk in the financial system. An independent MTO such as Dahabshiil has greater advantages to provide money transfer services at low costs – for example if a Rwandan citizen wants to send $100 to Australia it would cost only $5 and the receiver can pick the money within 15 minutes after showing an ID card or passport. These lower costs are attracting many people to use Dahabshiil and other regional MTOs with lower charges compared to MTOs working directly with banks under exclusivity agreements whose charges turn around 12% to send the money. This is important for enabling Cleanleaps  as it ensures that Rwanda and other African countries are increasing the volume of transfers due to the faster and easy transactions among countries, enabling the funding of community development projects, small business, and generally reducing the financial friction between African countries and the rest of the world.

Dahabshiil branch in Queensland- Australia

Editor's note: We’ve used Dahabshiil to transfer payments from Australia to countries in Africa and have found the process to be cheap and fairly easy to accomplish.  Some countries like Rwanda do not yet have access to PayPal or integration with local banks.  Services like Western Union and Paypal also have considerably higher processing fees.  Please let us know about your experience with money transfer services in the comments below.