Chipper Cash, an African fintech start-up, has expanded its peer-to-peer instant money service to South Africa. In addition to being able to use the remittance service, South African users will be able to buy, sell and transfer cryptocurrencies such as Bitcoin, Etherium and USDC Stablecoin.
South Africa is ripe for disruption and innovation
Chipper Cash entered South Africa because it believes the country is “suitable for barriers and innovation in the financial services market,” according to a report quoting Pardon Muzakachi, VP of the start-up for Africa Strategy and Partnership.
The report quoted the VP as saying that “it takes three days for a person to send money to South Africa in the United States”. On the other hand, it takes 48 hours to transfer funds from one bank to another.
This is an inefficiency that often leads users to unofficial channels, Muzakchi argued. The VP also shared statistics on the estimated number of users who were forced to use such an estimated channel. He said:
People use informal channels to send money. If you look at outbound remittances from South Africa, 68% are going through unofficial channels. Even with internal remittances, a significant amount goes through informal channels.
According to Chipper Cash VP, this is a domestic remittance that will be the starting point for a fintech firm in South Africa. However, only verified users will be allowed to use this app.
Dominance of Legacy Money Transfer Company
Chipper Cash, like other Fintech start-ups before this, is trying to claim a significant portion of the border remittance market share from established money transfer companies (MTOs).
By providing lower transaction costs, Chipper Cash creates the opportunity to feed into the potential existing MTO’s market share. However, it remains to be seen whether this mobile app is going to win over the financially excluded group in South Africa. This is because, in addition to the lack of the required verification documents, some of these financially excluded groups cannot access the devices needed to use the mobile app.
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