Tapping the Growing Money Transfer Market
Nala, a Tanzanian fintech company, has pivoted to offer remittance services in 2021. This move comes as the company seeks to tap into the growing money transfer market in Africa, which is characterized by increasing demand for reliable and affordable services.
Founding Vision
According to Nala founder Benjamin Fernandes, the company’s intention was to build its products on the premise of offering reliable and affordable services from the outset. Over the last two years, the fintech has enabled users in the diaspora (including those in the EU, U.K., and U.S.) to send money to their loved ones across 249 banks and 26 mobile money services in 11 African markets.
Market Integration
For markets like Kenya, Nala has integrated with mobile money service M-Pesa, enabling users living in the diaspora to pay local bills directly. However, this integration came with challenges, as the fintech could not guarantee dependability due to building its service on payment rails of other providers.
The Birth of Rafiki
To address these issues, Nala developed its own platform that directly integrates with banks and mobile money providers. Dubbed Rafiki, this B2B payment platform is designed to stem payout incidences, minimize user charges, and ensure reliability as the fintech looks to scale.
"We built the Rafiki infrastructure not by choice but by the nature of the market," said Fernandes. "When we started, we were experiencing 15% failure rates from partners as we started to scale, and this affected our cost of operations massively. The only way to solve this problem was at the source, to get licenses and build payment and treasury infrastructure reliably."
Rafiki: A Solution for Global Businesses
The Rafiki platform is currently accessible to a select few but will soon be available to global businesses making payments into and out of Africa. This means that global remittance companies can leverage Nala’s technology to offer their customers more efficient and reliable services.
"Rafiki is designed to enable global businesses to make seamless payments into and out of Africa," said Fernandes. "Our goal is to provide a platform that is easy to use, cost-effective, and reliable."
A Fertile Ground for Innovation
Despite the presence of established players in the African fintech market, there remains plenty of room for innovation. Financial Technology Partners, an investment banking firm focused exclusively on fintech, notes that Africa still has a large unbanked population (around 90% of payments are made using cash) and a significant underbanked population.
"Africa has all the ingredients needed to develop a robust fintech ecosystem," said the report. "A massive, young, unbanked and underbanked, tech-savvy population; traditionally heavy cash usage; rapid shift from informal to formal sectors; increasing mobile penetration; and a generally favorable regulatory environment."
Conclusion
Nala’s pivot into remittance services in Africa is an exciting development for the fintech sector. With its innovative Rafiki platform, Nala is poised to disrupt the traditional remittance market, offering global businesses a more efficient and reliable solution for making payments into and out of Africa.
As Fernandes noted, "We believe that our technology can make a significant impact on the lives of Africans living abroad by providing them with a seamless way to send money home."
