Amazon may be the key to disrupting the remittance industry – and they might not even know it.
Many Africans know the huge challenge of sending money back home. Have you ever tried to do it? You’ve got to fill out all sorts of forms, show your identification, get a special code, get that to those you are wanting to send the money to, or get your bank to help you, and so on. Despite a few innovations here and there from the big players, no one is going far enough to really help us in this – and take advantage of what is a huge market.
Some smaller innovators are certainly trying, and there are the likes of those in the digital money space. But I wonder why, if I can easily send money to others locally via an Electronic Funds Transfer (EFT), is it so hard to do it over our borders?
The answer is, of course, Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations, which are all aimed at impeding money laundering, terrorist funding, and who knows what else. However, these implementations have created more friction in the process of sending money back home to loved ones.
Here’s the real issue, though. We’re all assuming that you have to send money. But this isn’t right. When I send money to family in another country, it’s because I want them to use it for something. Maybe I’m helping them pay the rent or buy their groceries, maybe I’m buying them a gift or a book. Maybe I’m wanting it to go to textbooks for my younger brother. This is what remittance hasn’t figured out.
However, Amazon has.
There’s no doubt that this company has disrupted the way we purchase online, and the way we think of buying online. Every African with a phone or computer and internet coverage has access to Amazon. What is brilliant about Amazon is that whilst it has a consistent global approach, it does make local and relevant content available, especially to those countries it has offices in. Think about this: if I want to give my book, Disrupting Africa: The Rise and Rise of African Innovation to someone in the Gambia, I don’t need to send them money to go to a book store and try to find it. I don’t even need to buy a book from my stock and send it to them. All I actually need to do is hop onto Amazon and buy it there and put their address in. I can even track it on the way.
This kind of thinking can work for anything and everything, really. Amazon began to move into the grocery space just last year, with their first store expected to open in Seattle this year. Think about what it would mean if you could order groceries on Amazon and have it delivered anywhere in the world.
And it’s not like they can’t do it. Amazon have, in effect, figured out how to conduct remittance without having the onerous regulatory requirements. It’s actually very clever how they have implemented it. They have delegated all the regulation requirements like KYC and AML to the banks, who must report to the reserve banks on who is buying what where, while they themselves just focus on providing a good service.
Amazon has removed the friction in remittance. To buy on Amazon is a simple one-click process. I don’t need any supporting docs, FICA requirements, ID, or anything tedious. I know I can click and it’ll be delivered. In theory, if an individual can buy textbooks for his/her nephew in another country via an online or digital portal and the book is delivered to the home, that presents a whole new channel for the remittance market.
Some players have realised this and have created businesses to provide this sort of remittance. However, I don’t believe we’re thinking hard enough about the sort of disruption the likes of Amazon can cause in Africa. When the big boys come to town, what do we do? See, innovators can provide solutions, but on their own they simply cannot compete with Silicon Valley. Those who can compete, in my opinion, are actually the existing players.
For example, current Money Transfer Operators, such Western Union, a pseudo-African company based on their longevity on the continent, are poised to challenge this disruption. Their presence gives them a huge advantage and experience with how Africa works. They have started to move into the digital space (they must, otherwise their business will be cannibalised by Silicon Valley).
The pan African banks are also well-suited for this. Nothing stops them, technologically speaking, from sending money from one Bank account to another across borders. They already have KYC regulations and have everything required to do it.
In order to disrupt the remittance industry, these incumbent players have to either re-invent themselves or, in my view, partner with innovators. They need to think like innovators. The reality is, if the present players don’t, it’s inevitable that Silicon Valley will simply take things over. Again, consider how Amazon could sweep the current remittance players from under the carpet – simply through their already-built innovations, established name-brand, and frictionless user experience. Wouldn’t you use them if they started playing in this space in this way?
When they come – and they will – will we be ready for them?