Leading telecommunications giant, MTN, is making significant strides in reshaping South Africa’s remittance market with its innovative fintech platform, MoMo, according to a report by Fitch Solutions, a subsidiary of Fitch Group.

The movement of people and goods within Africa and the push for increased regional trade have created a demand for more accessible and cost-effective payment solutions. MTN is taking advantage of this, with its mobile money platform now facilitating cross-border transactions in ten countries.

Fitch Solutions noted, “Our view is that MTN stands to benefit from the move given SA’s addressable underbanked population, and it may be able to disrupt the country’s remittances market by making digital payments through bank entities outdated.”

South Africa’s socioeconomic landscape, as of September 2023, offers “significant opportunities to fintech players doubling down on critical financial services.”

Traditionally, cash remittance services in emerging markets are geared towards overseas workers sending money back home. This leaves room for players like MTN to simplify cross-border money transfers within Africa.

Fitch explained, “With regards to SA, the remittance market opportunity is firstly embedded in the country’s status of both recipient and sender of remittances, giving mobile money players like MTN considerable room for organic growth.”

Currently, MTN’s service is only for outgoing payments from South Africa, but the company has set its sights on capturing the billions of rand leaving the country’s shores each year, as well as capitalizing on the cash flowing into Nigeria’s market.

Bradwin Roper, CEO of MTN SA’s financial services business, emphasized, “Capturing flows for these two countries specifically would help MTN gain a strong position in the continent’s remittance market.”

South Africa witnesses an estimated $1.2 billion leaving its shores annually in remittances, while Nigeria is believed to have $18.6 billion coming into its economy from the diaspora.

Jabulani Debedu, principal consultant and tourism specialist at BDO SA, highlighted the importance of fintech in facilitating affordable and convenient cross-border money transfers for travel purposes.

Fitch suggested that fintech companies’ balance sheets typically feature low capital and operational expenditure figures, enabling them to earn good margins. Even a small 0.2% fee on remittance transfers can yield significant returns,” the research unit noted.

Currently, sending cash from South Africa to another African country can be costly, with bus drivers charging hefty fees for physically transporting money. In contrast, MTN is charging a 4% fee for such transactions, well below the industry average of around 10%.

Besides mobile payments, cryptocurrencies have gained popularity for cost-effective cross-border money transfers. The African Union Development Agency reports that remittances are the primary use case for cryptocurrencies in Africa. Blockchain-based solutions are reducing costs, improving transparency, and accelerating transaction speeds.

MTN’s MoMo platform is setting the stage for a significant transformation in the remittance market, simplifying the process and making cross-border transactions within Africa more accessible and affordable. As the fintech revolution continues to evolve, MTN is well-poised to take a leading role in reshaping financial services across the continent.