Fintech firms are scaling and expanding their operations to serve the growing remittances market

Fintech firms are scaling and expanding their operations to serve the growing remittances market

Fintech firms are scaling and expanding their operations to serve the growing remittances market

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The mobile remittances market is expected to grow significantly over the next three to four years, especially in the African region, where most of the consumers are left out of the formal banking sector. Targeting the projected growth in the remittances industry, Africa-based neo-banks are scaling and expanding their operations. For instance,

  • In November 2022, Kuda, a Nigeria-based fintech firm, announced that the firm is expanding its mobile-first and personalized set of banking services to the United Kingdom, while also offering a remittance product to Nigerians in the country. The expansion in the United Kingdom means that the firm will be targeting 178,000 Nigerians by offering them remittance services at a lower cost.
  • In Nigeria, the firm has recorded strong growth and adoption of mobile-based financial service offerings. As of November 2022, the firm had a user base of 5 million, which is three times more compared to what the firm had in August 2021, when it raised US$55 million in a Series B funding round.

Currently, Nigerians spend an average of 8% on transfer fees, which is much higher compared to the 3% target set by United Nations Sustainable Development Goals. Notably, the firm is charging a flat fee of £3 to its users on a transfer limit of £10,000. In the United Kingdom, Kuda will compete with market leaders such as WorldRemit and Remitly, the two firms which currently dominate the UK-Nigeria remittance corridor. Alongside these firms, Kuda will compete for market share with other African operators such as PayDay, Gray Finance, Lemonade Finance, and Kyshi.

Notably, Kuda is not only targeting the remittance market in the United Kingdom. The neo-bank also plans to offer direct debits and local transfer services to Nigerians in the United Kingdom from the short to medium-term perspective. It means that the African fintech firm is looking to take on digital banking giants such as Revolut and Monzo in the United Kingdom.

The medium-term plan announced by Kuda shows that the neo-bank is seeking to become a one-stop service provider for Africans, for all things related to digital payments, including remittances. However, unlike its remittance services that are built in-house, Kuda is expected to rely on third-party providers for offering these financial services. Notably, Modulr is one of the leading banking-as-a-service platforms in the United Kingdom, which offers mobile wallets, virtual and physical cards, direct debit, and local transfer services.

It is not just the African fintech firms that have adopted the strategy of scaling and expanding their businesses to tap into the growing remittance market. The trends are very similar in the Middle East, which is one of the biggest remittance markets globally. For instance,

  • In November 2022, Pyypl, one of the leading fintech firms in the United Arab Emirates, announced that the firm is looking to scale its services, while also entering into new markets across the region. Notably, the announcement from the firm comes after raising US$20 million in a Series B funding round, which included participation from a diverse set of international investors.
  • Along with remittances, Pyypl also offers digital payments and a range of other financial services to consumers in the Middle East and Africa region, who do not have access to formal banking channels. In terms of the user base, the firm has recorded a 4x growth, since raising a Series A round in February 2022. On the other hand, the transaction volume and revenue also increased 4x since the Series A capital was raised by the firm.

From the short to medium-term perspective, PayNXT360 expects more players in the mobile remittances market to scale and expand their services globally. This will further drive innovation and competition in the sector, which is projected to record strong growth over the next three to four years.

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