Widespread mistrust of the banking system is driving the digital shift towards a cashless society, and in places like Zimbabwe, Kenya and Somaliland, it has happened faster than anywhere else on the planet.

From Greece to Puerto Rico and Venezuela: these days, chronic debt, defaults, dollarisation and other currency woes can have a knock-on, positive effect within digital payments.

This was certainly the case in certain African nations, typically the kinds of places where banks and big financials like to pay lip service to the mass unbanked.

IBTimes UK spoke to Dr Ismail Ahmed, founder and chief executive officer of WorldRemit, an online money transfer business that sends payments to tens of millions of accounts in over 120 countries.

Referring to Zimbabwe, Ahmed said: "After a decade of financial crisis, the country really leap-frogged from being largely cash-based to now being one of the countries that is fast becoming a largely cashless society.

"Interestingly, they trust their mobile operators more than they do a bank. Mobile operators, particularly in Africa, invested heavily in the networks, it was quite expensive to put up all these masts and so on. So they actually are trusted a lot more because they own real assets. And of course they don't do any of the risk trading and so on."

Zimbabwe souvenirs

Zimbabwe, like Greece, had a lot of debt. Zimbabwe defaulted on a loan from the International Monetary Fund, with the country later experiencing hyper-inflation and local currency becoming worthless. Today, Zimbabwe dollar banknotes denominated in hundreds of billions are sold as souvenirs.

People lost trust in banks and a switched to a cash-only economy, stashing US dollars under the proverbial mattress.

One of the problems with dollarisation is that it is almost impossible to get change of dollar notes. Merchants would exchange small goods in place of cash change. These factors combined to bring about an explosion in digital money, conveniently stored on mobile devices.

WorldRemit's customers are mainly migrants and ex-pats who are doing cross-border transfers, mainly coming from Europe, North America and Australia, mainly to Africa, Latin America and Asia.


The company is disrupting the space traditionally lorded over by an all-pervasive physical network of Western Union and MoneyGram agencies. These are 95% offline, as in you go into a corner shop and do a cash-based transaction that then takes a day or so to be cashed out at other end.

The costs of this system are opaque and variable, but it is not cheap: you can end up paying between 10% and 20% of money being transferred and small transfers become untenable because of minimum fees of typically about €10 to €12 in Europe.

WorldRemit has introduced low minimum fees in Europe which start at less than a euro, rising to a maximum charge of £12 or £13 for transferring something like £2,000.

Ahmed said that due to the mass uptake of mobile wallets, much of the money his company transfers to places such as Kenya is stored and used to pay for goods and services and things like school fees via a phone, rather than being cashed out.

This is done using the most basic handsets with the phone numbers used as account numbers. The African continent, among other places, is now being flooded with cheap smart phones made in China that retail for less than $40.

Kenya goes digital

Blazing a trail in the digital payments space is Kenyan mobile phone-based money transfer service M-Pesa, launched in 2007 by Safaricom. It has since expanded to India and in 2014 to Eastern Europe.

Kenya's government has been able to revise its GDP by as much as 25% as it has moved from an informal economy due to digital payments. Moreover, mobile operators can take know your customer (KYC) to another level completely, what with call histories and satellite triangulation at their disposal.

Big banks and payment providers such as MasterCard and Visa like to invoke the world's unbanked as a "doing good" scheme that they are working away at. It is hard to see such projects being taken seriously (commercially at least) when users have moved so far on in these countries.

Ahmed said: "Visa and MasterCard are both active in Africa trying to do things. But what we see is that they want to set up payment schemes compared to the ones they have here. We don't think these will work because these schemes prove to be pretty expensive."

He pointed out that many domestic transactions are free, which has powered widespread adoption, with some mobile operators making enough money on airtime top ups to fund the service.

"So there would be no road for the likes of Visa and MasterCard in a domestic system that is completely free," Ahmed said.

"The fees for domestic payments are dropping as volume increases and the trend is that in the long term, a lot of the payments in Africa, in mobile money, will become free.

"Visa and Mastercard are using the system they have in the West and trying to replicate that, and the banks too. But these mobile money services are undercutting banks. We are yet to see what role these large companies will play."