In sub-Saharan Africa, millions of people depend on financial support from relatives abroad. However, sending money to this region remains the most expensive globally. According to the World Bank, remittances to sub-Saharan Africa cost an average of 8.37% of the transaction value. This high cost has spurred the rise of numerous African-founded fintech companies aiming to reduce fees and challenge traditional players like Western Union. The benefits of lowering remittance costs are substantial, potentially increasing the flow of foreign currency, which acts as a lifeline for both individuals and national economies. In 2023, remittances amounted to $54 billion in sub-Saharan Africa, exceeding foreign direct investment and official development assistance combined.

The high cost of sending money to sub-Saharan Africa can be attributed to several factors, including the reliance on cash transactions. Cash-based remittances are more expensive due to the physical infrastructure required, such as booths and tellers. Digital payments offer a solution but face challenges like limited internet access and user reluctance to shift from familiar cash systems. Andy Jury, CEO of Mukuru, explains that transitioning to digital services requires overcoming the psychological barrier of moving from tangible cash to intangible online transactions. Younger generations are leading this shift, while older adults remain loyal to traditional methods.

Beyond transitioning users to digital platforms, fintech companies are also tackling the complex network of intermediaries involved in international money transfers. Historically, these middlemen have driven up costs and caused delays. New fintechs like NALA, Flutterwave, and Chipper Cash are streamlining the process by cutting out intermediaries and enabling instant payments. These companies often hold liquidity in each country they operate in, allowing them to deposit funds directly into local accounts or digital wallets. Despite these advancements, navigating the regulatory landscape remains a significant challenge, with varying requirements across different African countries.

To further reduce costs, fintechs advocate for government intervention. Nicolai Eddy, COO of NALA, suggests capping fees charged by banks and digital wallets for local deposits. Dr. Joseph Antwi Baafi, a senior lecturer at Akentien Appiah-Menka University, emphasizes the need for governments to support infrastructure and provide tax incentives to help fintechs operate more efficiently. Tailoring products to meet local needs is crucial for success in this market. By understanding and addressing regional idiosyncrasies, fintechs can unlock vast opportunities for growth and innovation.

The future of remittances in sub-Saharan Africa looks promising, driven by innovative fintech solutions. As digital adoption increases and regulatory hurdles diminish, the cost of sending money home will likely decrease, benefiting millions of families and contributing significantly to economic development. The potential impact of lower remittance fees cannot be overstated, offering a brighter future for the region's financial landscape.