TechTech newsTechnology

Fintech in Latin America and Africa Is Breaking the Mold

This rings true for a country like Brazil. In 2019 the Central Bank of Brazil created Pix, an instant payment ecosystem that allows people, companies, and government entities to send and receive payments in a matter of seconds, 24/7 and 365. In an attempt to move the population away from cash, this government-backed standardization led to more financial inclusion and efficiency across the board. Brazilian financial services companies and fintech startups began working with the system, and its introduction meant a lot to local Brazilians, especially for those unbanked or in the informal economy, who use their unique chave, or key, to receive payments.

Meanwhile in Nigeria, because of the BVN, or bank verification number—a unique 11-digit number that is uniform for an account holder across all institutions—identity theft is much more difficult. In Kenya, where traditional banking was challenging due to geographical distances, Vodafone and Safaricom launched M-Pesa, an SMS mobile-phone-based payment system that also has branchless banking and helped secure finances for millions of unbanked citizens. The rapid adoption of M-Pesa across East Africa, combined with the popularity of transportation methods like motorcycles and scooters, spurred the development of new super-apps like Jumia and Glovo that make shopping and business interactions faster and more seamless.

“If I order eggs for my wife off of Glovo while she is baking, there will be a knock on her door before she puts her pan in the oven. This is the speed and efficiency that I’m talking about that is very hard to encapsulate, because I don’t think Americans—or people shopping in general—are used to that efficiency,” says David Wachira, the cofounder and CEO of Waya, a digital payments and banking app for Africans abroad. He also argues that M-Pesa may have reduced corruption and the plague of kickbacks in developing nations, because it is tied to individual mobile numbers.

Since America and its financial institutions and infrastructures have served in an “incumbent” and hegemonic position for so long, this legacy has continued to plague relationships with money for the underserved, especially in cross-border transactions and remittance payments. Africa remains one of the most expensive regions of the world to send money to, and many fintech startups are trying to resolve these challenges. However, the infrastructure that would allow us to facilitate low-cost, cross-border remittances to those destinations just doesn’t exist yet, says Wiza Jalakasi, the vice president of merchant business at ChipperCash.

“When you go to a bank in South Africa, and you’ve got your South African rands, and you ask them for Ugandan shillings, they’ll tell you that we don’t have those because the Ugandan shilling in South Africa is an exotic currency. The only currency that you can get with your South African rand is either the US dollar, the euro, or the pound,” Jalakasi says. The US dollar plays an intermediary role in the intra-African financial world. That means that for now, inefficiency, slow transfers, and losing money in multiple currency conversions only further exacerbates historical global inequalities. With the right buy-in, however, these new players may be able to break some of them down.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back to top button