The global remittance market is massive and is only expected to grow in size. It was valued at $689 billion in 2018 and is projected to reach $930 billion by 2026, growing at a compound annual growth rate of 3.9 percent from 2019 to 2026, even with an expected dip in remittances due to the coronavirus outbreak.
The remittance industry presents a massive opportunity for Fintechs in the business of sending money around the world. However, it also presents a challenge; the people in the parts of the world where remittances are popular – the Asian Pacific, Africa, South America, and Latin America – often cannot meet the digital ID requirements necessary to receive cash from abroad.
There are efforts to solve the remittance puzzle. This year, a group of nations including Switzerland, the United Kingdom, Ecuador, Egypt, El Salvador, Jamaica, Jordan, Mexico, Nigeria Pakistan, Sierra Leone, Yemen, and Zimbabwe teamed up with the World Bank and the International Association of Money Transfer Networks to help those without a digital ID to meet Know Your Customer (KYC) requirements. Together, they are working to use digital technologies to advance risk-based KYC requirements with the goal to address and lessen the risk for banks and other Fintechs attempting to transfer money to smaller, poorer remittance corridors.
Global Data Consortium (GDC) has ambitious plans to digitize KYC data for people without digital IDs. In the coming months, GDC and the Business Industry Information Association will use this space and a digital event to envision how to better access the remittance space. We’ll start with an exploration of the various regions where the remittance industry has the opportunity to grow. We’ll then outline possible solutions to meeting digital ID requirements in these parts of the world.
Remittances in this part of the world are concentrated in three countries: Nigeria, Ghana, and Kenya. Nigeria, which has a massive diaspora across the world, is by far the largest recipient of remittance money with $23.8 billion in 2019 followed by Ghana ($3.5 billion) and Kenya ($2.8 billion).
The cost of sending money to this corridor is most expensive in the world, even as the World Bank noted a dip in costs to 8.9 percent in the first quarter of 2020 for sending $200, down from 9.25 percent for the same time the
previous year (the global average is 6.8 percent). The United Nations hopes that increased competition in the remittances industry will help Sub-Saharan African countries reach a target goal of 3 percent cost by 2030.
Nigeria, home to 206 million people, is Africa’s largest economy. Lagos, the largest city there, is one of the fastest-growing in the world. It’s home to 22 million people and its population is set to double by 2050.
The country is also Africa’s leader in data protection, has recently issued the Nigeria Data Protection Regulation. This applies to all transactions processing the personal data of Nigerian citizens or residents.
There are 15 million out-of-country Nigerian citizens looking for new ways to send money home. Nigerian remittances have grown 210 percent over the last 10 years, with nearly $30 billion in remittances expected in 2021 and $35 billion expected by 2023.
Ghana has Africa’s 11th largest economy. It’s power in the remittance space is due to its large diaspora; some 4 million Ghanaians live outside of the country. Money sent home accounts for more than 5 percent of Ghana’s
According to the International Monetary Fund, Ghana had one of the fastest growing economies in the world in 2019. Over the last decade, it’s consistently had one of the fastest-growing economies on the African
Kenya has a population of 53 million growing at a rate of 2.7 percent each year. It’s home to a growing middle class, with gross national income per capita increasing 2 percent each year for the last decade. Mobile Fintech is
extremely popular there; each of its three largest mobile operators has a Fintech platform with a KYC component.
The three million Kenyans living abroad send more money home than the rest of the East Africa Diaspora combined. It’s also home to a $1 billion tech hub that is home to more than 200 startups, as well as established firms like IBM and Microsoft.
Kenya passed strong data protection in the Privacy and Data Protection Policy of 2018. It’s one of the strongest data protection laws on the continent that meets GDPR standards.
A Small Snap Shot of the Region
These are just three of the 46 countries located in Sub-Saharan Africa. The exact size of the region’s diaspora is difficult to estimate, but there are at least tens of millions, if not more than a hundred million, people from the region living abroad.
Across the entire region, the World Bank estimates that $37 billion in remittances will be sent home, despite the economic fallout from coronavirus. However, the bank also predicts remittances to the corridor will increase by 4 percent in 2021.