Competition is hotting up among companies that send money across South African borders for clients - and is expected to cut fees for remittances to below the global average of 7.52% of the amount sent.
South Africa and the sub-Saharan region are among the most expensive places globally to send money to and from, according to a World Bank report published last month.
But this is slowly changing. Two years ago, migrants paid a 20% service fee in South Africa. It now costs about 15% on average, according to the World Bank.
Start-ups such as the Hello Group, which runs the Hello Paisa product, are cutting service fees to 5%.
This week, Hello Group, which also provides cheap phone calls and textservices to low-income areas, won the "exceptional" category in the EY Southern Africa World Entrepreneur Awards in Sandton.
Nadir Khamissa, who founded the business with his brother Shaazim 10 years ago, said the company ran real-time cross-border remittance services at an average cost of 5% through a smartphone app and online, for about 70000 customers.
"Wherever we find people are marginalised, we push to change the rules," Khamissa said.
Remittances boost economic growth in some countries and are a lifeline for families who depend on this income for school fees and groceries.
The World Bank said cutting service fees by at least five percentage points could save up to $16-billion (R223-billion) annually.
Growth of remittance service providers in South Africa is in part due to the relaxation of finance laws, which do not require proof of residence and other details for remittances.
Rising levels of migration are creating demand for international remittance services.
Financial services technology, or fintech, companies such as Hello Group are perceived to be "essential in driving the market as they are able to offer money transfer services at more affordable rates", said Lehlohonolo Mokenela, an ICT industry analyst at Frost & Sullivan.
Fintech companies are ahead of South Africa's mobile operators in offering remittance services from South Africa to its neighbours, although MTN provides cross-border remittances in other countries.
Fintech group Mama Money, launched online earlier this year, has walk-in facilities in Cape Town, Johannesburg and Pretoria, through agents.
It is expected to have 10000 active customers by the end of the month. Its founders plan to expand into Malawi, Mozambique and Lesotho by February next year.
The company charges 5% per transaction but, co-founder Raphael Grojnowski said, "the vision is to charge even less as we continue to expand".
He said he believed that South Africa couldgo from the most expensive country from which to send money to the least over the next three years if more service providers dropped their fees.
This depends on reducing the cost of handling cash, according to Mike Cook, marketing manager at Mukuru.com, a remittance provider operating in five Southern African countries. Online payment providers do not handle cash, which gives them greater agility in setting their fees.
High fees are also a result of foreign exchange fluctuations. Some companies make additional money by charging a less favourable exchange rate.
"This bad exchange rate would not be included in the advertised fee of 5%," Cook said.
There are also additional cash-out fees for the recipient, which are also not advertised to the sender as part of the cost of the transaction.
Mukuru.com charges the sender a 10% fee.
It does not charge the recipient anything.
The value proposition offered by some of the start-ups is likely to disrupt the market, but "they will need support in the form of capital to begin to challenge already established players", Mokenela said.
Texas-based MoneyGram, founded 75 years ago, operates in 200 countries globally. The company is now offering online and other self-service solutions, which generate more than $160-million in revenue. MoneyGram's transactions grew 71% during the third quarter of this year.
The company charged a 5% service fee, which included foreign exchange, said spokeswoman Michelle Buckalew.
"We believe competition is good for business and for the customer," she said.