Remittance inflows to sub-Saharan Africa have been on an upward trajectory over the past decade since 2020; last year it increased by more than 6% to $45 billion. However, the steady increase in the inflow of remittances to the region has not reduced the cost of this activity. According to The World BankSub-Saharan Africa remains the most expensive region to send and receive money; Sending $200 costs an average of 8% commission compared to the global average of around 6%.
World Bank Analysts Prices for money transfers around the world a factor driving these rates is said to be transparency among remittance providers. According to the initiative, the lack of transparency around rates and fees reduces competition as consumers continue to use incumbent operators because “they do not know and cannot compare the services, fees and speed of their existing money transfer service with other products.” One way to solve this problem would be to create an aggregator of cross-border platforms and money transfer platforms. ZazuuThe UK-based Africa-focused fintech company that does just that by offering customers a variety of money transfer options announces it has raised $2 million in a new venture round.
The financial systems of the US and UK do not favor migrants, especially Africans. For many, certain financial transactions, such as building a credit history or sending money home, can be difficult.
With a migrant base of 800,000 people (most in the US and UK) sending money home each year, Nigeria is the largest recipient of over $17 billion in remittances in sub-Saharan Africa. Zazuu’s founders are of Nigerian descent; thus, they could very well relate to this problem. In an interview with TechCrunch, the CEO of Zazuu Kay Akinwunmi said he and his co-founders founded the company in 2018 after facing institutional prejudices like Africans living in the diaspora.
“We have experienced it. Seeing my mom send money and the friction there is pretty much the story of millions of Africans and migrants sending money,” said the founder, who launched the company with Corede Fanilola, Tola Alade as well as Tosin Ecoli. “Africans in the diaspora, whether you’re sending money to another part of the world or trying to get a loan here in the UK, are at a disadvantage.”
In addition, the remittance space has become fragmented. There has been an increase in money transfer products over the last couple of years with the rise of digital upstarts such as NALALemonade Finance and Chipper Cash joining platforms such as WorldRemit, Remitly and Western Union, legacy platforms that Africans primarily used to make money transfers.
To help users search for these different money transfer options in their region and compare rates and fees, Zazuu initially launched as a chatbot in 2020, informing users about daily money transfer rates across various platforms through Facebook and Telegram groups.
“We looked at the typical African shopper to understand their behavior and noticed an interesting trend,” Akinwunmi said. “We realized that Africans have this pathological behavior, which is that we love to go shopping, compare our choices and try different options before we finally make a decision.”
According to the CEO, the initial product helped dispel customers’ preconceived notions about which service was best priced as they got to know new providers. The product has now grown into a full fledged aggregator with over 17 service providers (money transfer companies serving multiple corridors). It provides money transfer options from Canada, the US and seven European countries, including the UK, allowing customers to use the Search and Compare service and find providers that can transfer money from those countries to Africa.
“The essence of Zazuu is to take power away from financial institutions and money transfer companies that are inherently biased. We want to give customers a transparent bird’s eye view so that for the first time they can see all their options in one place, including rates, speed and reviews. The onboarding process will be much easier and better for them,” he said, comparing Zazuu’s processes with those of traditional market players.
Zazuu’s offer is clear to buyers; however, it can be difficult to understand what this means for providers on the platform. But Akinwunmi says his platform solves vendors’ biggest problems: customer churn and high customer acquisition costs. “Zazuu is a marketplace and the reality is that customers go shopping looking for multiple entities to send money to. But this is an opportunity for providers to amplify their brand message or advertise other parts of their business besides good rates. And instead of just getting a recommendation, we bring real transactional value to them,” he said.
Although Zazuu did not provide exact data on the number of users, the company said that this base grew 2.3 times in the first quarter of 2022 compared to all of 2021. The company will use new investments to maintain those numbers, hire more talent and scale its operations. Pay with Zazuu a feature that allows users to make transactions within the app. While the service is only available to senders in the UK and recipients in Nigeria and Ghana, Zazuu says it plans to expand access to other sending and receiving countries. There are also several products in development that address financial issues faced by African immigrants, such as access to credit.
“The goal is to create absolutely unbiased financial well-being for African immigrants around the world,” said the chief executive.
Zazuu’s funding round included pan-African investors Launch Africa and Founders Factory Africa, Hoaq Club, British rapper Tiny Tempah, iROKOtv founder and CEO Jason Njoku, and Kuda CEO Babs Ogundeyi. Commenting on why Launch Africa invested in the four-year-old company, Zach George, the firm’s managing partner, said: “Zazuu is creating a real market for financial services, starting with money transfers and payments. We believe their business will bring fairer and more transparent pricing and better cross-border mobility of money to the African continent.”
Credit: techcrunch.com /