Uganda: Western Union, Moneygram Meet Biggest Foes in New Online Players

Sending and receiving money across the border used to be a preserve for two international firms, Western Union and MoneyGram.

But with the advent of mobile technology, the future of these two firms remains questionable as mobile money transactions break barriers to connect people across the world, writes ALI TWAHA.

In the last four years and three months since she travelled to work in Oman, Aminah Gamama has sent thousands of Rial (Oman currency) back to her family in Uganda. As a single mother, she has done this effortlessly to fend for her five children, with the oldest daughter now in senior six.

In 2014, Gamama sent home Shs 3.5m using Western Union to cater for her children's school fees and other necessities. However, when her sister Mariam went to withdraw the money at a Western Union agent in Kampala, through Equity bank, her identity card did not match the information on the account.

"When I reached the [Equity] bank, I was told the money had arrived but the name [used on the transfer account] did not match my identity card. The bank teller told me to contact her [Gamama] to change the name [to match my identity card," Mariam recalls.

When she finished the process of changing the name, Mariam returned to the bank to withdraw the money. To her shock, though, the money had been withdrawn.

According to Mariam's account of the story, there was a possibility that there were unscrupulous persons within the bank that might have connived to withdraw the money from the Western Union account.

"The case was taken to CPS [Central police station] and the person who had stolen the money was arrested. However, I was told, she paid Shs 400,000 to the police and she was released. We never recovered that money," Mariam recollects.

If one is to receive money from Western Union or MoneyGram, most commercial banks would not give out the money when the information on the transfer account does not match that of the receiver. Some of the basic requirements to receive the money include: proper identification of the recipient, the expected amount from the sender, and an answer to the test question.

It is such inconveniences that companies such as Worldremit, Paypal, Xoom, and useremit.com [Ugandan firm], are positioning themselves to offer money transfer services as consumers across the globe continue to migrate to mobile and online channels.

The rise of online and mobile money transfers has given consumers more choice, flexibility, and better service. According to data from Bank of Uganda, remittances from Ugandans in the diaspora increased to $900m in 2014 from $816m in 2011. However, mobile money transactions within Uganda alone are at least 10 times more than remittances.

MORE COMPETITORS

Stone Atwine, the chief executive officer at useremit.com, a local remit firm that officially joined the market in 2013, says "millions of dollars have gone through their platform."

"We have also noticed that Ugandans are really patriotic and would rather give their money to a Ugandan company. All we have to do was build trust that the money is safe," Atwinne told The Observer.

Atwine explains that the remit system provides convenience and efficiency to the sender as it will not require identification and other documents. Mobile telephone companies provide records of all subscribers on their platforms.

Both Atwine's remit system and WorldRemit's charges are relatively lower compared to Western Union and MoneyGram. For instance, useremit.com charges 4.9 per cent of the sent amount, WorldRemit charges 5.99 per cent to send $100 (about Shs 341,100).

For years, Western Union and MoneyGram have been the biggest players globally, operating approximately 1.1 million retail centres in more than 200 countries when it comes to cross-border money transfer services. However, the future of these companies has come under its biggest test with the competition from new online platforms.

WORLDREMIT PARTNERSHIP

In January this year, WorldRemit -- United Kingdom's fastest technology firm - announced its partnership with MTN Group that allowed Ugandans abroad to send money instantly to their families using their mobile money accounts. Ugandans in the diaspora will have to download a WorldRemit application onto their phones which is then synchronised with their local mobile money account.

"For diaspora members sending to friends and family back home in these countries, mobile money is a real game-changer. In Uganda, mobile money has already overtaken cash pick-up and bank deposits as the preferred method to receive money," said Alix Murphy, the senior mobile analyst at WorldRemit in a statement on January 28, 2016. He continued:

"We expect this trend to continue as MTN's mobile money services reach millions of the people without bank accounts, giving them access to a variety of life-enhancing financial services, including savings and insurance schemes."

Information from the Uganda Communications Commission indicates that mobile phone subscription grew from 19.5 million in 2013 to 23 million in 2015, which has strengthened the use of the mobile money services. On the other hand, internet users also grew from 8.5 million to 13 million people.

MERGER TALKS

In December last year, the Financial Times reported that MoneyGram predicts remittance mergers due to increased regulation and the rise of tech-savvy competitors who will put greater pressure on the money transfer industry.

The alleged report of Western Union and MoneyGram merging were, however, dismissed by the two companies. Although Western Union is reportedly said to be performing better than MoneyGram. Both companies are now stepping up their digital operations to compete with the new tech rivals, especially in developing countries where digital payment systems are becoming popular.

In November 2015, Western Union announced a newly-created role, the chief strategy and product officer, within its management system. Elizabeth G. Chambers, an expert in marketing brands, was appointed to this role. Her core task in the company is to grow consumer retail, digital transformation and facilitate the alignment of investment priorities.

"She brings an excellent track record of omni-channel development and brand transformation to Western Union team. Her expertise in developing market-leading products and partnerships will be critical as we execute on our strategic vision," said Hikmet Ersek, chief executive officer at Western Union, in a statement.

SOURCE:THE OBSERVER