Central bank regulators have lifted the suspensions placed on two digital remittance platforms working with the Bank of Abyssinia. It comes nearly four months after they ordered the Bank to stop using the CashGo and MamaPays platforms for remittance services until questions around the legality of the operations were settled.

Last week, regulators reversed their decision and permitted both platforms to resume operations.

Fikadu Digafe, vice governor of the National Bank of Ethiopia (NBE), confirmed the decision communicated to the executives of the Bank of Abyssinia (BoA) and the state-owned Commercial Bank of Ethiopia (CBE). The authorities believe that there is no third-party compliance risk.

“We received the letter last week,” said Abay Sime, director of online banking at the Bank of Abyssinia.

The decision is a relief for industry pioneers like Tewodros Shiferaw, co-founder of CashGo. The father of four, Tewodros founded Rosetta General Business, a company engaged in real estate development, hotels and media, after returning from Asia in 2008. Two years ago, he introduced GuzoGo, an online travel booking app, out of frustration at the incapability of travel agencies to issue flight tickets after working hours. Tewodros continued with his ventures, launching CashGo, a digital remittance services platform developed by Sol-Get Travel Plc.

CashGo has been providing remittance services, partnering with BoA. The app has been integrated with Visa and Mastercard to allow people abroad to transfer funds directly to accounts with BoA, deposited in Birr.

“The app has facilitated daily transfers of 5,000 dollars,” Tewodros told Fortune.

CashGo was on the verge of a partnership with the CBE when the central bank's suspension order surfaced.

“The service was suspended after we signed an agreement with CashGo,” said Dahilak Yegezu, vice president for digital banking at the CBE. “We'll restart from where we left off.”

Under the supervision of Abie Sano, president of the CBE, senior executives were also negotiating with the other remittance platform provider, MamaPays. Belcash Technology Solutions Plc launched the platform under its HelloCash mobile money system. Incorporated in Ethiopia in 2011, Belcash is a Dutch company that designed automated solutions for HelloCash.

Tewodros believes digital remittance platforms have great potential to boost the formal remittance flow into the county.

Last year, close to five billion dollars in remittance was made to Ethiopia, accounting for close to five percent of the country’s gross domestic product (GDP). The United States, Saudi Arabia and Israel are the primary sources, accounting for two-thirds of the total received. A large volume of cross-border remittances is sent through eight money transfer operators, partnering with commercial banks, including Western Union, Money Gram, and WorldRemit.

Banks also offer transfers through correspondent banking relationships using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system. Large international transfers use SWIFT, while money transfer operators are unsuitable for those who do not have bank accounts. Despite the growth of remittance inflows in recent years, informal networks remain predominant in Ethiopia. Experts attribute this to low penetration of mobile money platforms and limited access to financial services.

“It was possible to investigate the workings of the remittance platforms, as other countries do, without suspending them,” said Tewodros Tassew, a financial technologies consultant.

The rising popularity of digital remittance services among low-wage migrant workers is compelling governments in countries like the Philippines to pay more attention to the digital remittance industry by introducing rules and regulations. They became even more critical during the COVID-19 pandemic as travel restrictions meant fewer visits to banks and other financial institutions to send money back home.

The market value of the global digital remittance market reached 18 billion dollars, according to V Fact.MR, market research and competitive intelligence provider. The market value is expected to reach 64 billion dollars in the coming decade. The Asia Pacific region is anticipated to emerge as the fastest-growing, as economies such as China and India continue to focus on adopting cashless payments and mobile banking solutions.

PayPal Holdings, an American multinational financial technology company; the London based TransferGo; and Azimo B.V., online remittance services headquartered in Amsterdam, the Netherlands, are among the major players in the industry.

The expert observed that more customers are shifting toward digital remittance services as they help cut down on the time and costs of traditional money transfers. According to the World Bank, the cost of sending money from the Middle East and North America to Ethiopia is less than five percent of the transaction value. This makes Ethiopia one of the countries with low transfer fees, along with Nigeria and Egypt.

Tewodros disclosed that CashGo is in the process of partnering with four other private banks.

PUBLISHED ON Jun 04,2022 [ VOL 23 , NO 1153]

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