Tim Masela, former head of the national payment systems department at the Reserve Bank, has called for the alignment of cross-border remittance regulations to reduce costs for consumers.
Speaking this week at the launch of FNB Globba, a cross-border payment product in partnership with Mastercard, he said regulators often pulled in different directions, which affected the cost of sending and receiving money.
He said, for example, the payment regulator wanted payments to be fast, while the financial integrity regulator wanted payments to be stopped for checking. “All these regulators have their own demands on what should happen, and this brings the burden that impedes speed and increases cost,” he said.
Remittances between migrants in South Africa and the Southern African Development Community (Sadc) are often referred to as a lifeline, as they help people send money to their families back home.
With FNB Globba, FNB wants to cut the cost of cross-border remittances to customers while ensuring transactions are made in real time. “It is about cost. People want to know how much they are going to pay, and they want certainty around that,” said FNB personal segment CEO Lytania Johnson.
“When you are sending money cross-border, you carry the emotional weight of supporting your family. You also want to know they don’t have to take several taxis or walk miles to get their money. Solving for the last mile is what we’re trying to do.”
When it comes to cross-border payments, there is a lot of anxiety. When we talk about big brands like FNB and Mastercard, the trust component they bring is significant. That will be valued by our clients
— Richard Porter, FNB’s head of foreign exchange
Remittances are often costly for low- to middle-income earners, with banks including Capitec in August announcing products to ensure cheaper and safer services. Remittances are also dominated by non-banking service providers including Mukuru, Sikhona and Mama Money that have been targeting migrants in the region.
A remittance assessment report published a year ago estimated that remittances from South Africa to Sadc countries had grown threefold to R19bn in 2024 from R6bn in 2016 as Covid-19 travel restrictions pushed the move to formal routes. Zimbabwe, Lesotho, Malawi and Mozambique account for 90% of formal remittances in the region.
Richard Porter, FNB’s head of foreign exchange, said Globba was a solution aimed at low-value remittances. “When it comes to cross-border payments, there is a lot of anxiety. When we talk about big brands like FNB and Mastercard, the trust component they bring is significant. That will be valued by our clients,” he said.
Onor Kursun, Mastercard’s executive vice-president for commercial and new payment flows for eastern Europe, the Middle East and Africa, said this week that FNB Globba ticked the right boxes when it came to addressing the needs of African consumers.
“We introduced the latest technology used by Mastercard and most of the players in the world. It starts with addressing customer needs, and innovation effectively follows,” he said.
A cross-border payment report by the World Bank released a year ago said Zimbabwe received almost half of all Sadc remittances sent from South Africa. It said inward remittances accounted for 9.6% of the Zimbabwean GDP in 2023: “While remittances constitute a significant portion of the Zimbabwean economy, the cost of sending them from South Africa to Zimbabwe has been quite high, averaging 12.7% as of the first quarter of 2024.″
The report said most remittances were sent through informal channels, leading to even higher costs and lower financial inclusion among customers. There was financial exclusion among undocumented Zimbabwean migrants and their reliance on cash increased their costs.
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