Zazuu is a U.K.-based and Africa-focused fintech that does precisely this by offering customers various remittance options. The firm has raised $2 million in a new venture round led by Draper Esprit Ventures and First Round Capital, as well as traditional remittance investors like Khosla Ventures, Gust Capital, and iAngels.
Africa is experiencing a growing remittance inflow into the continent. Last year, sub-Saharan Africa received an estimated $45 billion in earnings, up from $42 billion globally. However, these funds are not cheap by any means. The World Bank estimates that sub-Saharan Africa is the most expensive region for sending money home.
Remittances are a mainstay of the global economy. They are estimated to reach $600 billion annually by 2030 reaching more than 10% of the world’s gross domestic product (GDP). Millions of African migrants remit money through cash transfer programs to support their families back home every year.
Since 2010 alone, sub-Saharan received some $22 billion of remittance inflows from abroad (mainly Europe and Oceania), increasing by an average rate of 2.6% per year since 2020; last year, it increased by more than 6%. However, one consistent aspect of the rising remittance inflow was their prices stayed high.
Several financial systems in the United States and the United Kingdom, including bank accounts and credit cards, do not favour migrants, particularly African ones. For many performing certain financial activities like building one’s credit history or sending money back home can be difficult.
With over 800,000 Nigerians living overseas, Zazuu is doing just as much to bridge the gap between Nigeria and the diaspora (although it’s worth noting that Nigerians founded Zazuu). The startup aims to solve the long-distance money transfers problems with a mobile app through which users can send & receive funds locally and internationally.
The African remittance space has grown tremendously, creating more competition and choice. For example, NALA launched its platform in March 2018, and within a month of its launch had processed $100 million worth of payments. Another upstart, Lemoinade Finance, operates in the region providing digital payments solutions to over 1 million users globally and offering mobile money transfers via SMS. In addition to these two platforms, Chipper Cash provides services for small business owners in Africa, operating locally and globally.
In conclusion, Remittance fees in sub-Saharan Africa have declined since 2016; however, the region remains the most expensive to send money to. Innovation and competition in mobile money transfer will play a key role in driving fees as more remittance players enter the market and provide competitive pricing.