The African continent is witnessing a transformative shift in the way money flows. Remittances, have become a critical financial lifeline for many African families.

According to the World Bank, a remarkable $94.6 billion reached Africa in 2022, with a significant portion ($20 billion) moving within the continent itself.

However, a major obstacle has historically stood in the way of maximising the impact of these funds: high transaction costs. Traditional remittance services often levied costly fees, averaging 6%, with some Sub-Saharan regions burdened by costly charges as high as 20%.

This meant less money reached its intended destination, hindering economic development and limiting financial inclusion.Thankfully, a powerful force is changing the game: fintech, or financial technology. Fintech companies are changing the remittance landscape in Africa by offering:

Reduced Costs: Fintech solutions are known for their lower operational expenses, leading to significant cost reductions for senders and receivers of remittances.
Increased Convenience: Gone are the days of complex procedures and long wait times. Fintech apps offer a user-friendly experience, enabling users to send and receive money quickly and easily, often from the comfort of their mobile phones.

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A noteworthy example of this transformation is Safaricom’s recent expansion of M-Pesa, a highly successful mobile money service, into Ethiopia. This move is expected to significantly boost financial inclusion across borders, allowing more Africans to participate in the digital remittance revolution.

The impact of fintech extends far beyond convenience. Experts predict a remarkable growth trajectory for Africa’s formal remittance market.

The International Monetary Fund estimates the market to be valued at $100 billion in 2022, with the potential to reach a remarkable $283 billion by 2035. This projected compound annual growth rate (CAGR) of 12.1% is largely attributed to the disruptive power of fintech.

Several innovative fintech ventures are already demonstrating the potential for a brighter future. The Pan-African Payment and Settlement System (PAPSS), launched in 2022, aims to streamline cross-border transactions within Africa.

By facilitating instant, secure, and cost-effective payments, PAPSS has already processed over $1 billion in transactions across 13 countries. Its success is a testament to its ability to drive financial integration and reduce remittance costs across the continent.

Other prominent players, like Chipper Cash and Nala, are making significant contributions. Chipper Cash, a cross-border payment app, has partnered with global giants like Block’s TBD platform to expand its reach and offer more affordable remittance solutions.

Similarly, Nala, a Tanzanian fintech company, leverages technology to provide accessible and user-friendly remittance services, particularly for underserved populations in East Africa.

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As Africa’s remittance market flourishes under the influence of fintech, we can expect a wave of positive developments:

Financial Inclusion: More Africans will gain access to formal financial services, empowering them to participate more actively in the economy.
Reduced Remittance Costs: As competition intensifies and innovation flourishes, costs are expected to continue dropping, ensuring more money reaches its intended recipients.
Economic Development: Increased access to these vital funds will fuel economic growth, leading to poverty alleviation and improved living standards for many African families.

Fintech is not just changing the way money moves in Africa; it’s transforming lives and laying the foundation for a more prosperous future. As technology continues to evolve and new solutions emerge, the continent’s remittance landscape is set for even greater innovation and inclusivity.