The money transfer business is personal for Ismail Ahmed. It was cash wired by his family that allowed him to make the final leg of his journey from escaping fighting in his native Somaliland to London in 1988, to take up a university scholarship.
As a student, Ahmed encountered the inconvenience of having to trek to the office of a transfer agent that took up to 20 per cent of his money in fees. So it was his small jobs as a student that sustained him and his refugee family as well in those early years.
Ahmed chose to write his dissertation about the effect of such payments on people, which in 2005 led to a job with the UN Development Programme in Nairobi, helping remittance agents comply with regulations to prevent money laundering and financing of terrorism.
But he soon found that there were widespread fraud and corruption involving UN officials and consultants.
Ahmed became a whistle-blower against the practices, but he alleged that UN investigators were “only interested in identifying who the whistle-blower was”, and he was pushed out of his job.
In 2010, the UN Ethics Committee awarded him compensation of year’s salary for the way he was treated — a well-timed cash boost as he was looking to found WorldRemit.
In 2010, he founded WorldRemit in a career that has centred on remittances.
“That was the beginning of my interest in remittances,” he said. “Very early I learnt about how remittances worked … it was a key source of discomfort as well as being expensive.”
Today, WorldRemit is one of a handful of fintech firms that is upending the remittances business that has long been dominated by three US firms — Western Union, MoneyGram and Ria — as well as banks.
Piggybacking on the development of mobile money systems in Africa, Asia and other developing countries, these fintech firms offer migrant labourers a more convenient way to send money home at a lower cost.
The market for personal transfers is sizeable, with the World Bank putting it at $689bn in 2018. About $529bn of that was sent to people in developing nations, an increase of 9.6% from the previous year.
And personal transfers are important, not just for the recipient families.
Today, WorldRemit serves 150 countries, including many in Asia, Africa and Latin America.
It has partnered with mobile money firms that helped revolutionise the lives of many people, who often do not have bank accounts, by making mobile phones a way to transfer money inside countries.
Without having the expense of its own network of agents, WorldRemit can offer its services at a lower price, which makes it possible for people to send lower amounts when their families need money urgently.
But that is not the only advantage.
“Digitalisation is a shift from informal to formal economic activities,” said Ahmed.
The informal nature of many old-fashioned remittance services, where there was no or little control over the identity of those transferring money, had led Western banks to stop serving several countries in order to avoid running afoul of anti-money-laundering and terrorism-financing regulations.
“A lot of our traditional competitors accepting cash often pick up huge fines because of the fact that they are outsourcing their core compliance functions to somebody who owns his small corner shop, who is doing money transfers as a side business,” Ahmed said.
He said procedures that digital firms employ to ensure compliance are more robust and that a part of WorldRemit’s early work was spent convincing regulators of that.
Despite the number of competitors now crowding the sector, Ahmed believes there is plenty of room for growth.
“Even today, only 10 per cent of the remittances on the send side are cashless or digital,” he said. “We think that in the next few years as much as 40-60 per cent of the remittances will move to cashless.”