In an increasingly interconnected world, multi-currency and multinational remittances play a crucial role in the financial ecosystem of many countries. According to the World Bank, remittances to low and middle-income countries reached US$669 billion in 2023 with one billion people involved as remittance senders or receivers.

With the high cost of living and macroeconomic climate, these funds are a lifeline for migrants and their families, supporting essential needs, such as healthcare, education, and housing, allowing recipients to weather economic shocks.

Despite the significant impact of remittances, the cost of sending remittances remains high,  percent of the amount sent. Sub-Saharan Africa is the most expensive region to send money to, at 7.39 percent. 

This is more than twice the target set by the United Nations’ Sustainable Development Goal (SDG) 10 , which aims to reduce inequality within and among countries by lowering remittance costs to less than 3 percent by 2030.

Traditional remittance channels, such as banks and money transfer operators (MTOs), although safe, often involve high transaction fees and unfavourable exchange rates. These costs disproportionately affect the most vulnerable populations who rely on remittances for their daily needs. 

High fees and unfavourable exchange rates discourage financially vulnerable persons from using formal remittance means and resort instead to informal means which are often unsafe. 

Furthermore, the process of using traditional remittance channels can be time-consuming and inconvenient, requiring recipients to travel to physical locations to collect money.

Mobile money services have gained traction in many parts of the world, particularly in Sub-Saharan Africa, where many people don’t have access to traditional banking services. For example, over the past year, M-Pesa processed 33.7 billion transactions, worth US$381.2 billion. Leveraging remittance services as part of this mobile money ecosystem has become a game-changer, offering a streamlined, cost-effective solution.

With mobile money, remittances can be transferred directly between individuals’ mobile wallets, making it more efficient and affordable. This method is not only faster but also significantly cheaper. 

The World Bank highlights that when sending US$200 to low- to middle-income countries, mobile money providers remained the least costly at 3.45 percent - aligning more closely with SDG 10, compared to banks at 11 percent. 

Additionally, the accessibility of mobile money makes it easier for those living in rural and underserved areas to receive remittances safely in lieu of receiving the remittances through informal means.

This reduction in costs translates directly into tangible benefits for remittance recipients. More money reaches its intended destination, empowering individuals and families, who can save and invest in education, healthcare, and small business ventures. 

Moreover, lower remittance costs can stimulate economic activity at a local level, driving consumption and fostering entrepreneurship, ultimately contributing to poverty reduction and socioeconomic development.

In many African countries, there has been a significant uptake of mobile-enabled remittances. In Kenya, for example, M-Pesa processed more than 90 percent of all remittances into the country in FY24. In Lesotho, remittances are an important contributor to the economy, making up 23.7 percent of the country's GDP (World Bank, 2022). 

Mobile money services such as M-Pesa are increasingly becoming the preferred means of receiving remittances in Lesotho. Despite this potential, challenges remain. Enabling people and small and medium sized businesses on the continent to "roam" with their wallets and transfer money seamlessly across borders from one wallet to another, is crucial for maximising the advantages of mobile money.

Harmonising regulations across different jurisdictions can facilitate cross-border remittances and reduce costs for marganilised communities. There is an opportunity for the private sector to work together with governments and regulators to create a supportive environment that encourages innovation and competition while ensuring consumer protection against risks, such as cyber fraud.

We cannot ignore that a digital divide still exists in Africa. Only 37 percent of the population had access to internet services in 2023, according to a report by the International Telecommunications Union, and smartphones are unaffordable for many. 

Investments in digital infrastructure, driving down the cost of devices and expanding financial literacy programmes are essential to drive inclusion so that mobile-enabled remittances can reach all segments of society, including those in remote and marginalised communities.

In addressing these challenges, a collaborative effort is needed. Policymakers, financial institutions, and technology providers must work together to unlock the full potential of mobile money, enhancing sustainable development and improving the lives of millions worldwide. 

In South Africa, for example, strides are being made by the Reserve Bank to accelerate the pace of adoption and use of digital payments through high-level action plans, such as achieving interoperability in partnership with MTOs and digital payment providers.

Mobile money is a powerful tool that can make remittances more affordable, accessible, and efficient, ensuring that more money reaches those who need it most. As we strive to create a more equitable and inclusive digital economy, embracing mobile money is not just an option but an imperative.