Back when Uhuru Innovative Solutions first announced its WhatsApp Wallet there were a few concerns. No one could argue against the idea – remittances via the already popular WhatsApp platform.
Uhuru gives Zimbabweans based abroad, many of whom are financially excluded in the countries they migrated to, the opportunity to send money or pay for electricity, airtime and DStv for their friends and family back home. All this via WhatsApp and not the insecure informal channels most have been forced to use.
Understanding that our Zimbos abroad are not necessarily swimming in money, Uhuru allows the sending of amounts as small as US$3. That could mean a family being able to buy some bread and not going to bed hungry.
The idea is a good one, that was not in doubt. The questions were on what the regulators would think about the idea.
We got the answer earlier this year when Uhuru was included in the Reserve Bank of Zimbabwe’s Fintech Sandbox. The Sandbox still remains a bit of a mystery. All we really know is that it is for those that have “already developed their service, product, or business model and are ready to undertake a proof of concept through monitored market testing.”
When Uhuru was accepted in May, the RBZ said they would only be commencing operations later on. There was a real possibility that they would never get to that stage. Fortunately for them, the RBZ has approved Uhuru to test out their service.
Uhuru Innovative Solutions (Uhuru) was granted regulatory sandbox testing approval.
The RBZ will be keeping a close eye on them to make sure they don’t fall afoul of any laws and regulations.
So, with the regulatory greenlight, the questions go back to the service itself. What exactly do they need to succeed?
What Uhuru needs to succeed
They will need a banking partner. Uhuru has secured that and will be announcing which bank they will be working with as they begin testing in the coming weeks. Their website lists Nedbank, Absa, Standard and FNB as enablers, on the South African side I presume. On the home front EcoCash appears to be a partner already.
Agent and merchant network
Banking partners are the easier hurdle when it comes to remittances. For various reasons, when dealing with foreign currencies like the USD and the Rand, Zimbabweans predominatly use cash. One of those reasons is the high tax of 4% that’s on electronic USD transactions.
All this means when someone receives funds into their Uhuru wallet they will want to cash out. That means Uhuru has to have a presence across the nation.
It can be argued that it’s more important to make sure that it’s easy for the sender, the Zimbo abroad, to load their wallet and send money easily. That’s true to some extent. When one is receiving funds they usually have to work with the service that is most convenient for the sender.
However, if working with a certain remittance service means someone’s family back home having to travel long distances to cash out then one that has a better agent network in Zimbabwe may be chosen.
Uhuru is not just a remittance service. They offer other payments like we discussed above. This means an agent and merchant network is essential for success.
Uhuru says they have a network of agents and merchants across Zimbabwe but we don’t know just how extensive that agent network is. We shall find out in due time if they have enough.
We talked about the informal channels that people have been using being insecure. That may be but if people are to switch to a service like Uhuru’s, the formal channel cannot be that much more expensive to use.
There is already the hassle of dealing with some kind of KYC, something that scares away those who illegally immigrated. Uhuru therefore cannot afford to be that much more expensive.
When we first covered Uhuru we talked about there being a 5% fee for the South African based Zimbo to load their Uhuru wallet at an ATM. An EFT (electronic funds transfer) costs less at 2.5%.
Those are charges just to load the wallet. There will then be the charges to send the money and probably even to cash out as well.
We are not sure how those tariffs will look. Luckily as these would be remittances in from abroad they won’t attract the hefty 4% IMTT that applies to domestic USD remittance transactions. However, Uhuru still has to get its cut and that has to be low as possible.
What do you think?
In all this we are assuming that Uhuru has the regulatory approval to operate in South Africa and other foreign countries. I would imagine they do as the RBZ has been working with them and I presume advising them on how to navigate.
If that’s the case, what do you think are the chances that Uhuru will succeed? Do you think the undocumented in South Africa will use such a service over the Malaicha arrangements they have?