Moving money across borders remains a complicated task for individuals and businesses around the world alike. For groups like refugees and asylum seekers, who face many more unthinkable challenges including lack of access to financial services and lack of a digital identity in their new market, moving funds and assets poses even more significant barriers. There are, however, a number of international organisations and fintech innovators working to solve this very particular challenge and bring financial inclusion for refugees to the forefront. Here we hear from the BOSS Money team about how new technologies like blockchain are being used to address this issue.
There are a myriad of reasons we might need to move money across borders. Globally, demand for remittances continues to soar - whether sending money to friends and family back home, paying workers or suppliers around the world, making foreign investments or otherwise. Increasingly, many may find themselves needing to move entire stores of value to new markets due to migration, displacement or for the purposes of security or investment. Yet even with a number of heavy-hitting fintech players in the remittances space, there is significant room for growth.
Remittances to sub-Saharan African countries alone totaled $53 billion in 2022, but average fees remain at times prohibitively high, and many transactions still occur through informal channels. Even when sent digitally, intra-African money transfer corridors through traditional remittance and payments applications are the most expensive in the world. According to the World Bank, the average cost of remitting US $200 to sub-Saharan Africa was 7.8% (US$15.6) in 2022, compared to a global average, for LMICs, of 6%. Regionally, the average cost of sending US $200 in 2021 from Tanzania was 27%, from Nigeria, 19%, from South Africa, 14.7%, from Angola 14.3% and from Kenya 13.9%.
Today the UN has designated 103 million people around the world as forcibly displaced — and nearly 33 million of them are refugees. According to the United Nations Refugee Agency (UNHCR), 44 million people in sub-Saharan Africa are predicted to be displaced in 2023, up from 38.3 million at the end of 2021. For these groups, the above fees can be insurmountable - coupled with lack of widespread access to the tools and technology required, and even more challenges that come with moving country, such as lack of a digital identity or access to a bank account.
Here we focus on two primary customer segments when it comes to refugees from African markets: those that have moved country to flee conflict around the world, and African refugees that have successfully resettled in the US and need to send money to family members back home.
Refugees and asylum seekers fleeing conflict face exclusion from formal financial systems and lack the ability to safely store and transport assets across borders. Most lack a digital identity in their new markets, meaning that due to identity legislation they are unable to open a bank account and are also excluded from alternative digital financial services such as mobile money. Other digital wallets and app-based solutions don’t often work for these groups because they typically rely on internet access and smartphones or require a high level of financial literacy.
Even when accessible, many financial solutions don’t typically cross borders, leaving customers with no choice but to forfeit value or, most commonly, to carry physical cash. However, in areas of crisis, cash is often stolen by armed militia or local gangs, or extorted through bribes by border guards. As well, those that are able to receive remittances from friends and family elsewhere often find themselves at increased risk of theft when they pick up cash at a bank or retail location (Riecke, 2017).
As a result, refugees have to resort to creative, yet often very inconvenient, means to get around the system, such as sending envelopes of cash with friends or strangers traveling internationally or entrusting bus drivers and other transportation professionals with money to deliver (Wilson & Krystalli, 2017).
According to the World Bank, more than $52 billion in personal remittances was sent to sub-Saharan Africa in 2022. While this remains a primary means of getting much-needed cash into the hands of refugees and asylum seekers in these markets, challenges on both the sending and receiving end remain significant - from exorbitant international exchange fees, to lack of a safe and secure means of receiving money on the other end.
The PROSPECTS project, a partnership between the International Labour Organization (ILO), UN Refugee Agency (UNHCR), UN Children's Fund (UNICEF), the International Finance Corporation (IFC) and the World Bank, was designed to enable secure, cost-effective ways for refugees to transfer money across borders. Aimed at integrating over 500,000 forcibly displaced and host community youth into labor markets by 2025, PROSPECTS focuses on policy reform, demand stimulation and skill-building, to ensure refugees have the means to participate in economic activities and send or receive money securely across borders.
However, there remains a gap when it comes to government intervention between the financial inclusion policies put in place by governments and eventual implementation by financial services providers in these markets.
Digital technology such as mobile money and digital cash transfers play a vital role here. For instance, the UNHCR used digital cash transfers, often via mobile money in African markets, to deliver nearly $700 million in cash assistance to about 9 million refugees worldwide in 2022. In Zambia, UNHCR advocated to the Bank of Zambia and ZICTA, the telecommunications regulator, to allow refugees to use the refugee certificate and refugee ID card as valid ID for mobile wallet registration.
Similarly, blockchain technology, with its potential for secure and traceable transactions, offers a promising avenue for enabling refugees to control their finances and move money securely, particularly across borders.
BOSS Money is a digital wallet designed to enable safe and easy remittances from the US to individuals in African markets by leveraging the blockchain.
The BOSS Money team found that, in addition to challenges faced by individuals fleeing crises on the ground, those in the US looking to send money home also struggle with extremely high exchange fees. The team verified through 350 first-hand interviews (100 within the I-Corps program) that individuals typically lose 15-20% in fees and exchange rates when transferring money from the US to Africa (Anderson, 2014; Bennett & Etter, 2017). Those sending money are often refugees or migrants themselves and cannot afford these rates.
The team at BOSS Money is tackling this challenge by offering affordable and convenient digital financial services that are accessible from any mobile device — no smartphone required. Their blockchain-based wallet solution protects customers’ savings through blockchain technology, without exposing them to the volatility of cryptocurrency, by allowing customers to store multiple currencies as digital tokens.
BOSS Money users can receive, store, transport and send money domestically and across borders from a basic / feature phone via USSD short codes or via a smartphone, with transactions secured on a distributed ledger. As the digital tokens are pegged to fiat currencies, customers don’t have to worry about inflation. The solution supports a variety of fiat-backed digital tokens – such as KESC, UGXC, RWFC, TZSC, GHSC and ZMWC – that act as an alternative to fiat currencies. Users can swap/add any digital tokens within the app. BOSS Money ultimately creates an economic identity customers can use to establish themselves in a new country, including the security of biometrics, transaction logs and a savings history. As well, sending Boss-to-Boss is always free.
BOSS users can cash in from any mobile money number in any of the countries in which BOSS Money operates. If they want to send to someone who doesn’t have a BOSS account, they can cash out to that person’s mobile money number and pay a small fee.
One common challenge with solutions like this one, however, is security. The team has solved this through blockchain technology plus PIN authentication, which enables complete transparency, greatly reducing the risk of fraud or corruption. On the blockchain, transactions are confirmed and received immediately, unlike other money transfer systems where transactions may be confirmed immediately, but the actual settlement of funds can take hours or days to process.
Increased mobile money infrastructure and the effects of COVID-19 have only made the environment more hospitable for digital solutions, and worked to increase consumer trust. In Rwanda, for example, mobile money usage increased by 450% from March to May of 2020 in parallel with the government’s efforts to reduce the use of hard cash – and much of that adoption has been maintained. By integrating with these networks and building across them, solutions like BOSS Money fill existing gaps and allow refugees to access their savings domestically and across borders, opening a path for international remittances and creating an economic identity in the process.
Services like these ultimately help refugees and asylum seekers save by offering more cost effective, safe and accessible means of moving money than banks, mobile money, international remittance companies or other alternative means – moving ever closer to enabling economic security for the stateless and excluded around the world.
Grace Anyetei is a storyteller, speaker, a student of life and a young African woman in the tech space passionate about impact and growth. Grace is currently the Regional Director of Operations, Africa at IDT Corporation, with a focus on their remittances solution, Boss Money Wallet. She works on increasing their market coverage across Africa, growing their partner portfolio and working with key players in the payments ecosystem to map out a product architecture.