Money transfer service providers are very susceptible to disruption from new technologies. For many, the time has come for Bitcoin and other digital currencies to replace existing money transfer services. However, Money Gram, one of the largest money transfer providers alongside Western Union, recently confirmed that it wants to stick to its business model in Nigeria.
Unfortunately, it is not easy to get a foot in the money transfer business of many African countries. In Nigeria, companies must officially obtain a license in order to work as a money transfer service provider. The requirements for this license are set by the Nigerian Central Bank and were only recently made more difficult.
Money Gram’s Africa Business Director comments on the company’s Bitcoin evolution:
“Lagos was chosen as Money Gram’s headquarters for English-speaking business operations in Africa. We have invested several million US dollars to improve our money transfer service. We know the needs of our clients and try to meet them in the best possible Bitcoin evolution. For example, our ‘Cash to Bank Account Service’ offers Nigerians the opportunity to deposit funds directly into the Bitcoin evolution account of their choice”.
The business with money transfer service providers is very strong in Nigeria and provides the Nigerian economy with around 21 billion US dollars each year. Nigeria is responsible for 60% of the total money transfer volume through service providers such as Money Gram in sub-Saharan Africa. A large part of the money comes from the USA and Great Britain.
As long as the Nigerian central bank does not issue licenses for Bitcoin service providers, it will be difficult for Bitcoin and other digital currencies to replace the outdated business model of money transfer service providers.
Comment by Sven Wagenknecht:
Even though, understandably, the Nigerian central bank and the money transfer service providers Bitcoin services are a thorn in the side, there is no reason to be concerned. The reasons for expanding the use of digital currencies in Africa are much stronger than the innovation-hostile self-interests of the above-mentioned players.
The business model of money transfer service providers, such as Money Gram and Western Union, is completely outdated and very consumer-unfriendly due to its enormous fees. Nevertheless, many people in developing countries are dependent on their services because they do not have their own bank account and are therefore forced to use the services and pay usurious fees.
Bitcoin and Co., on the other hand, mean that there is no longer any need for a bank account, so that people can transfer money without intermediaries or fiduciaries, such as money transfer service providers. With the help of digital currencies, over 2 billion people in the world who do not yet have a bank account have access to financial services. It is therefore only a matter of time before the business model of money transfer service providers can no longer withstand the pressure of digital and decentralised financial services.
In Nigeria in particular, the problem of a lack of licensing on the part of the central bank is negligible. Approximately 80% of all people in Nigeria work in the so-called informal sector (black market). Here there is neither state regulation nor state taxation. It is therefore only logical to resort to a non-state currency, i.e. a digital currency.