The war on exorbitant remittance fees

Published on June 23rd, 2016

Founders Raphael Grojnowski and Mathieu Coquillon bootstrapped Mama Money and say they’re targeting South Africa’s high cross-border money transfer costs that are robbing migrant workers of hard-earned money meant to improve the lives and livelihoods of their families back at home.

Grojnowski says South Africa is the most expensive country in the world to send money out of.

“According to the World Bank, the average cost to send the equivalent of $200 from South Africa to SADC countries is 18.69%. The global remittance price average is 8.9%,” he explains.

“The South Africa-Zimbabwe corridor has the highest volume regarding people and money transfers. But families in Zimbabwe who receive money from Zimbabweans working in South Africa receive far less because of the excessive pricing of money transfers.”

What makes the situation all the more unacceptable is that the actual costs of money transfer are small, according to Grojnowski.

“It is therefore not right for money transfer services and banks to charge such excessive prices. Established providers such as Western Union, MoneyGram as well as Mukuru charge a minimum of 10% and on top of that, add their own exchange rate margins. They are making huge amounts of money on the backs of poorer people and, their pricing is not transparent,” he says.

Grojnowski and Coquillon aim to change this with Mama Money, which has a transparent fee of 5% for transfers, with no margin charged on the exchange rate.

“We researched the vast development potential of reducing remittance costs from South Africa to Zimbabwe, “says Grojnowski.

“The impact would be instant, immediately helping both senders and receivers. More money would go into the pockets and bank accounts of recipients. In turn, they would have more money for essentials – basic food, better quality food, education, health and then housing.”

The duo launched Mama Money with a specific focus on Zimbabwe because this is where the immediate need to assist people was the greatest. Current estimates suggest that there are between one to three million potential Zimbabwean remitters in South Africa.

A pricing analysis conducted by Eighty20 Consulting found that the average price to send $200 over the SA-Zimbabwe corridor is 8.92% which is higher than the global average cost of 7.53% (as at Q1 2016) calculated by the World Bank.

The name Mama Money was born out of the fact that most people send money to their mothers at home. Furthermore, women are known to be far more responsible with money than men, who tend to go for non-essential items whenever they have spare cash. People can send money to recipients in Zimbabwe using their phone or their computer, 24/7.

The startup has enjoyed some quick wins and launched cash payments via major retailer channels in March of 2016.

“A few months later, our footprint became national through a partnership with PEP stores,” says Grojnowski.

“Our partnership with PEP is particularly exciting as it has unblocked the issue of Zimbabwean migrants not being able to open bank accounts in South Africa.”

Zimbabweans, Malawians, Basotho, Mozambicans, Zambians and Congolese across the country can now register at PEP. Mama Money will be rolling out transfers to all those countries.

“We also have accounts with the key big South African banks for Mama Money customers to use EFTs,” adds Grojnowski.

“Right now, cash shortages in Zimbabwe are our key challenge. However, this also represents an opportunity to promote the use of mobile money, mobile banking and mobile payments. After all, cashless electronic payment systems are the future. We will be launching our connection to the Zimbabwean Telecash mobile money wallet in the next few weeks.”

Mama Money is also set to add a new pay-out partner in Zimbabwe to its existing partner, CABS, through an agreement with TeleCash Wallet. CABS is Zimbabwe's largest building society and a subsidiary of Old Mutual Zimbabwe.