Chipper Cash, an African fintech start-up, has extended its peer-to-peer instant money service to South Africa. In addition to being able to use the money transfer service, South African users will be able to buy, sell and transfer cryptocurrencies like bitcoin, ethereum, and USDC stablecoin.
South Africa ripe for disruption and innovation
According to a report that quotes the start-up’s VP for strategy and partnerships in Africa, Pardon Mujakachi, Chipper Cash has made the foray into South Africa because it believes the country “is ripe for disruption and innovation in the financial services market.”
The report also quotes the vice president as revealing that it takes “three days for a person in the United States to send money to South Africa”, while on the other hand, it takes up to 48 hours to transfer funds from one bank to another.
The report also quotes the VP revealing the fact that it takes “three days for a person in the U.S. to send money to South Africa” while on the other hand, it takes up to 48 hours to move funds from one bank to another.
It is these inefficiencies that often lead users to informal channels, argued Mujakachi. The VP also shared figures of the estimated number of users that are forced to use such informal channels. He said:
People end up using informal channels to send money. If you look at the outbound remittances from South Africa, 68% is going through informal channels. Even with domestic remittances, a significant amount goes through the informal channel.
According to the Chipper Cash VP, it is such domestic remittances that will be the fintech firm’s starting point in South Africa. However, only verified users will be allowed to use this app.
Dominance of old money transfer organizations
Chipper Cash, just like other fintech start-ups before it, is attempting to claim a sizeable portion of the cross-border remittance market share from established money transfer organizations (MTO).
By offering lower transaction costs, Chipper Cash potentially has a chance to nibble the market share of existing OTAs. However, it remains to be seen if this mobile app is going to win over South Africa’s financially excluded groups. Indeed, in addition to not having the required verification documents, some of these financially excluded groups do not have access to the devices necessary to use the mobile application.
