
In a new World Bank report on the Market for Remittance Services in Southern Africa, we outline the binding constraints that appear to be holding back the digital remittances revolution in the countries that make up the Southern African Development Community (SADC).
Digital disruption in international person-to-person remittances is well underway. New research estimates that international digital remittances will exceed US$300 billion globally by 2021, making up 44% of total formal international remittances, and up from 36% in 2018. Thanks to high rates of mobile phone penetration and growing internet access, digital players are not only gaining ground, but they are also forcing “traditional” incumbents to expand their digital footprint.
Despite this encouraging trend, the combined global market share of digital disruptors remains small; and in Southern Africa, their presence has not yet placed significant downward pressure on remittance costs. In fact, the costs to send remittances to, from and within Southern Africa are among the highest in the world. As shown in the figure below from the World Bank Remittance Prices Worldwide, in Q3 2018, the average cost to send US$200 to SADC countries was 11.94%, compared to 8.96% in Sub-Saharan Africa (SSA) and 6.94% globally.
Source: World Bank, Remittance Prices Worldwide (2018)

Source: World Bank (2018
Despite these positive developments, several bottlenecks remain. The top three constraints include:
- Cash is still king. Cash-based remittance services continue to dominate the remittances market in SADC, largely due to low levels of financial inclusion and a reliance on cash for domestic retail payments and transactions. As a result, even where digital origination takes place in sending countries, MTOs must develop and maintain costly agent networks to disburse remittances in cash in receiving countries. While shifting remittances from cash to digital channels will have a considerable impact on costs, more needs to be done to encourage access and usage of transaction accounts and e-wallets, to broaden digital payment use cases beyond P2P money transfers, and to build awareness of new digital remittance services.
- Use of regional payment infrastructure for low-value remittances is yet to reach scale. To date, SIRESS has been used mainly for the settlement of high-value, low-volume payments associated with cross-border trade. While work is in progress to also allow settlement of cross-border retail payments through SIRESS, as of today low-value payments, such as remittances, continue to rely on correspondent banking arrangements which are expensive and slow. Nevertheless, international remittance hubs–i.e. switching platforms that connect different remittance service providers–are emerging to provide faster and cheaper clearing and settlement of cross-border remittances in the region.
- Regulatory requirements remain costly and burdensome, given the lack of harmonization across the region. Regulatory requirements associated with AML/CFT and foreign exchange reporting remain a key bottleneck for the efficiency delivery of remittance services in SADC and elsewhere. While shifts to the risk-based approach to AML/CFT has allowed for simplified customer due diligence (CDD) for low value remittances in some SADC countries, monitoring and reporting requirements remain burdensome. Furthermore, the lack of harmonization with regards to licensing, compliance and other regulatory requirements creates further hurdles for digital players looking to scale low-cost remittance services within the region.
For more information, read the full report.
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