Merry Christmas Africa! I thought this post is well timed for those abroad sending their best wishes home.
Remittance payments to Africa are among the highest anywhere, over $40 Billion a year- infact the payment flows sometimes exceed foreign assistance African countries get in aid, often with a heavy commission cost to Governments, NGO and development consultants. Nigeria receives over $9 billion in remittance flows a year, whilst Kenya and Senegal receive over $1 billion.
Africans such as myself have migrated abroad in the last 4 decades yet many have retained links to family members and constantly send money home. The main channels to do this have been companies such as Western Union that focus on mainly the cash remittance services.
Willstream hopes to change all that by providing a better means for migrants to control the flow of their hard earned money to where it is intended. Sending money to loved ones is not as simple as it sounds, the delivery is largely dependent on an intermediary, whether family member or not, it may on occasion be misdirected or just slow down critical payments that affect lives in areas such as healthcare and education. In fact over 70% of remittance flows are targeted to healthcare, food and education. By changing the distribution model of remittance from person to person transactions to more of an ecommerce play where migrants send money directly to merchants and the beneficiaries can redeem the service (alerted via SMS)- This helps merchants by tapping into a critical channel, diaspora/migrants, instead of relying on the customer to pay with money they might not have on hand which they may receive inefficiently via traditional remittance money transfer services.
Willstream is founded by an accomplished team that has worked in the field of mobile money in the last decade and have been frustrated by the promise of mobile money to solve certain payment problems- mobile money has often been tangled up in the aid and telecommunication industry and has not yet been effectively extended to commerce and trade. Whilst it is important to allow easy airtime top up that primarily benefits mobile operators’ customer retention, and similarly microfinance is made vastly more efficient with mobile money. Trade and commerce is still an open field that may be seeking a solution beyond what mobile operator controlled mobile money platforms can offer.
Where is the M-PESA API?. What if I want to send money from Tanzania to Kenya via mobile money?…. Lets not try fit every payments solution in Africa around traditional mobile money.. Or as they say “try fit a square peg in a round hole”.
Willstream does not even rely on mobile money at all for its solution! They focus squarely on the problem of empowering migrants to control the flow of their funds to family members’ need back at home by tapping the power of web and mobile. That’s why they have begun to focus in the healthcare vertical and begun the pilot by partnering with Senegal’s hospitals and targeting migrant populations that for historical and other reasons have clustered around France and the United States (each country will differ). Affording to Tofenne Kama, Willstream’s founder- Senegalese hospitals including Clinique Medickane, a diabetes treatment centre, have been extremely keen to adopt their solution in the pilot stage, their concerns often center around time to payments (1-2 weeks) and how they can further leverage the platform to communicate with their existing patients. For instance a hospital can create a health care plan for a family on the platform that migrants can select as part of package to “stream” home.
Early results from Willstream’s pilot in Senegal show that the demand comes mainly from women, around 70% of users. This should not be surprising given global trends that women control a big portion of household spending- its hence likely to be that women migrants or diaspora are most likely to send assistance to look after their families.
Collection of payments is often one of the toughest problems for any African merchant operating in a service or retail business. One of the promises of mobile money has been the ability to allow convenient transfer of money and to transform the way business is done. As I have argued in a previous post on payment wars- some of the needs Africans have with mobile money may go far beyond what the mobile operators are willing to do. Credit Card companies such as VISA, Mastercard and American Express in the west often started by a consortium of banks have done well by building out an extensive merchant network to handle commerce even in the digital/online era. Paypal has also been at this forefront for ecommerce- although none of these have established themselves in the same manner in Africa yet. There lies an opportunity for Willstream to carve out a new merchant and user network focused on the diaspora remittance flows that could potentially disrupt companies such as Western Union. From the migrants’ point of view, think of Willstream as a virtual credit card targeting the diaspora with merchants in their home countries. From the merchants, it feels like a customer relationship management portal where they can also manage incoming payments from abroad.
Whilst a look at Western Union’s website shows some interest in tapping mobile money to better improve their distribution model, it has to be as encompassing in involving local merchants to be directly competitive with Willstream.
One of the big questions that quickly comes up with Willstream’s service is the cost- “Great, I can control my money better- but what commission do they take?”- Willstream takes 5% for payments less than $500 and they take a flat fee of $30 and 1% of the transactions for greater than $500. Willstream estimates this translates to a 20% saving via traditional means of sending money when you take into account the risk of money being diverted. The real value comes in keeping hospitals in business (critical cash flow) and beneficiaries getting treatment at hospitals and keeping children in school via on-time school fees…. Take that AID industry! Directly measurable and sustainable as long as migrants and diasporas send money home to support their loved ones- talk about aligned human incentives.
Let us watch the rollout and uptake of their service very carefully as building out the merchant and diaspora network will take a solid go-to-market strategy that will be unique for each country and their customer service, user experience which translates to a level of trust that will need to be as high as traditional remittance services, not to mention the other important elements in any commerce solution such as fraud prevention, adoption and support by the banking and regulatory environment within each African country. The service is likely to benefit urban areas first before impacting rural primarily based on strengths of the merchant networks and likely beneficiary locations- given the growth in urbanization of African cities, this isn’t a bad place to start.
Merchants interested in signing up for the service can visit merchant.willstream.com.