The remittance inflows to sub-Saharan Africa over the past decade have been on an upward trajectory since 2020; last year, it increased by more than 6% to $45 billion. However, the steady rise of remittance inflows to the region has not made this activity cheaper. According to the World Bank, sub-Saharan Africa remains the most expensive region to send and receive money; sending $200 costs an average of 8% in fees compared to a global average of about 6%.
Analysts from the World Bank’s Remittance Prices Worldwide say a factor that affects these rates is transparency among remittance providers. According to the initiative, a lack of transparency around rates and fees reduces competition as consumers continue to use incumbents because “they are not aware of and cannot compare services, fees, and speed of their existing remittance service against other products.” One way to solve this would be to make an aggregator of cross-border and remittance platforms. Zazuu, a UK-based and Africa-focused fintech that does precisely this by offering customers various remittance options, is announcing that it has raised $2 million in a new venture round.
Financial systems in the US and the UK do not favor migrants, particularly African ones. For many, performing certain financial activities like building one’s credit history or sending money back home can be difficult.
With a migrant base of 800,000 people (most of whom are based in the US and the UK) sending money home annually, Nigeria is sub-Saharan Africa’s largest recipient of remittance inflows at over $17 billion. Zazuu founders have Nigerian heritage; thus, they could relate very well to this problem. In an interview with TechCrunch, Zazuu CEO Kay Akinwunmi said he and his co-founders started the company in 2018 after experiencing such institutional biases as Africans living in the diaspora.
“We’ve experienced this. Seeing my mom send money and the friction there is pretty much the story of millions of Africans and migrants sending money,” said the founder who launched the company with Bark of Fanilol, Tola Alade and Tosin Ecolie. “Africans in the diaspora, whether you’re sending money to another side of the world or trying to get a loan here in the UK, are at a disadvantage.”
Also, the remittance space has become fragmented. There’s been an increase in remittance products over the past couple of years, with the entrance of digital upstarts such as NALA, Lemonade Finance and Chipper Cash joining the likes of WorldRemit, Remitly and Western Union, legacy platforms Africans primarily used to carry out remittance activities .
To help users search these various money transfer options in their region and compare rates and fees, Zazuu initially launched as a chatbot in 2020, informing users of the daily remittance rates of various platforms via Facebook and Telegram groups.
“We looked at the typical African customer to understand their behavior, and we noticed a fascinating trend,” Akinwunmi said. “We realized that Africans have this pathological behavior, which is, we love to shop around, to compare our choices and try different options before we finally make a decision.”
According to the CEO, the initial product helped dispel customers’ preconceived notions about which service had the best rates as they got introduced to new providers. The product has now evolved into a full-blown aggregator with more than 17 service providers (money transfer companies that serve multiple corridors) listed. It provides options for money transfers from Canada, the US and seven European countries, including the UK, letting customers use its “Search and Compare” service and find providers that can move money from these countries to Africa.
“The core of Zazuu is to take power away from financial institutions and money transfer companies, which are inherently biased. We want to give customers this bird’s eye and transparent view so that for the first time, they can see all of the options in one place, including rates, speed and reviews. The onboarding experience is going to be a lot smoother and much better for them,” he said, comparing Zazuu’s processes to traditional market players.
Zazuu’s proposition is clear to customers; however, it can be tough to see what’s in it for providers on the platform. But Akinwunmi argues that his platform solves providers’ most significant pain points: churn and high customer acquisition costs. “Zazuu is a marketplace, and the reality is customers are shopping around looking for multiple entities to send money. But it is an opportunity for providers to reinforce their brand message or advertise other parts of their business aside from good rates. And as opposed to getting just a referral, we’re bringing real transactional value to them,” he expressed.
While Zazuu didn’t provide hard user numbers, it said this base has grown 2.3x in Q1 2022 compared to the entire 2021. The company will use the new investment to keep these numbers up, hire more talent and scale its Pay with Zazuu feature that allows users to complete transactions in-app. Although this service is only available to senders in the UK and receivers in Nigeria and Ghana, Zazuu says it plans to expand access to other sender and receiver countries. Also in the works are a couple of products that address the financial challenges African immigrants face, such as access to credit.
“The aim is to build a completely non-biased financial well-being for African immigrants across the world,” said the chief executive.
Zazuu’s financing round welcomed participation from pan-African investors Launch Africa and Founders Factory Africa, Hoaq Club, British rapper Tinie Tempah, iROKOtv founder and CEO Jason Njoku and Kuda chief executive Babs Ogundeyi. Commenting on why Launch Africa invested in the four-year-old company, Zach George, the firm’s managing partner, said, “Zazuu is building a true marketplace for financial services, starting with remittances and payments. We believe their business will bring fairer, more transparent pricing and better cross-border mobility of money across the African continent.”