An African money-transfer firm with big ambitions | Hacker News Reader

An African money-transfer firm with big ambitions

economist.com

10 pointsedward12 comments

Tangentially related: Anyone here has good alternatives for electronic payments in East Africa, and mid/East Asia?

This is for a commercial startup that that is already working in these areas, currently using mobile payments.

What problem are you looking to solve? I may be able to help.

Thanks!

They are trying to collect small monthly payments for a service that is better than the service these people/businesses already use.

Currently distribution works using mobile payments:

1. Customers pay using telecom companies:

2. A voucher sms is sent out.

3. This voucher can be entered into automated distributed distribution center that will release what the customer bought.

It works surprisingly well, but sometimes they are tempted to use scratch cards in some of the markets.

The commission to send $100 to Somalia from the UK is 7.5% according to their website.

Imagine working your ass off on a construction site in London to send money to your family in Somalia and realizing that one out of every 13 dollars you earn is being pocketed by these middlemen.

There's nothing to admire here.

It's always a question of "is it worth it?". If they take 7.5%, but make sure the money actually reaches the destination and doesn't disappear along the way, then I would say it's pretty good. Unless there are any alternatives that are reliable and are cheaper? I don't suppose you can just send 100 quid from a UK account to someone in Somalia,because they might not have an account, or live very very far away from the nearest "bank". And even if you could, I imagine both banks would take a nice cut, probably just as large or larger than 7.5%.

Did you read the article? They rely mostly on staff knowledge to ensure the money reaches the intended recipient.

Imagine sending that $100 with a destination that reads: "Deliver to Mirjam, daughter of Anna, who lives in the red house down the street from the Hargeisa old town well."

7.5 dollars seems pretty cheap for that kind of service.

Physically handling this much cash and verifying IDs and all this manual garbage is not actually necessary to solve the real problem which is transferring value to Mirjam.

The correct solution is to open accounts for these people like an actual bank and subsidize ATMs and electronic POS systems to encourage people not to have to actually take out cash.

Then you have a nice stable assets line on your balance sheet and you can start lending money out and enabling investment and making a profit from the interest.

> 7.5 dollars seems pretty cheap for that kind of service.

Sure, but if you send $1,000 it doesn't get any cheaper. Still worth $75? $750?

You must have an excellent alternative to this if it's cheaper than 7.5%. I'm curious, what is it?

You could physically mail a credit card to your recipient and have them use their local ATM once a week for ~0% + $2 a withdrawal.

What is a fair fee to you think? How do you think that could be achieved?

10-15% at Western Union. 30%+ for bank wire transfer. 7.5% to transfer money reliably into a failed state seems quite reasonable at this time.

If it's providing a high profit margin with regards to the risk involved, the price will fall over time as competitors enter the market.

I'd be interested to explore blockchain tech for low-cost money transfer, but the hard part is creating a global network of interchangers to turn the money back into cash - and there'd still be fees to cover risk.

Ordinarily, I paid about 2%. Maybe the rates have changed. I haven't used their services in a long while. Then, I mostly used the services between Kenya and Somalia which are two neighbouring countries.

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