New players eat into Western Union market

Monday November 13 2017

A customer at a Western Union outlet in Nairobi.

A customer at a Western Union outlet in Nairobi. New entrant Wave has been the key beneficiary in the competition for diaspora remittances going by the performance at Equity Bank. PHOTO FILE | NATION  

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Money transfer service provider Western Union has reported a decrease in transactions in Africa as competition for diaspora remittances increased following entry of new players such as Wave.

Western Union’s third quarter financials show an 11 per cent decline in the number of transactions conducted in its Middle East, African and South Asian markets.

This was the only cluster to report a drop in the number of transactions, which was attributed to a decline in Africa. The decline follows a trend that started in 2015 with a 1 per cent drop in transactions before a six per cent drop last year.

Western Union had not responded to our queries seeking specific performance in the East African market by the time of going to press.

“Transaction declines in several African countries also contributed to the decrease in revenue, partially offset by strength in Saudi Arabia and the United Arab Emirates” notes Western Union in its 2016 annual report.

The disclosure comes at a time when regional lender Equity Bank has said the volume of cash remitted through its partnership with Western Union has dropped by 31.5 per cent in the past two years to Ksh3.9 billion ($390 million) from Ksh5.7 billion ($570 million). Western Union was used to receive 26 per cent of cash sent from abroad through the bank down from 58 per cent in 2015 and 50 per cent last year.


Equity Bank received 10 per cent of the total diaspora remittances sent to the country in the nine months to September. Kenya had received Ksh141 billion ($1.38 billion) from the diaspora as at September.

New entrant Wave has been the key beneficiary in the competition for diaspora remittances going by the performance at Equity Bank.

Wave was used to pay 29 per cent, being Ksh4.3 billion ($430 million), of the total amount remitted through Equity Bank in its first year of operation. The platform does not charge transfer fees to send money from the US, UK and Canada to Ghana and East Africa. Wave makes its money through margins on foreign conversions.


Paypal has also become a key player taking up some of the business in Equity Bank. Paypal also enjoys preference among youths involved in online jobs.

The government has been under pressure to license more players in the foreign remittance business in order to enhance competition and lower the cost of sending money home for those working abroad.

Sending money across African markets is more expensive than from developed economies due to the various options in other markets. For example, the cost of sending $200 from South Africa and Tanzania to Kenya is 14.3 per cent and 13.1 per cent, respectively, while sending the same amounts cost 6.6 per cent from the United Kingdom.

Setting up of regional banks is said to have lowered reliance of cash transfer channels within the East African region with customers able to make transfers within the bank network.

Previously parents sending school fees and upkeep monies for their children studying in another East African country had to use the cash transfer channels.
Remittances have grown to become key elements of the economy to African states.