![Why Retailers are Embracing Domestic Money Transfers](https://blog.electrum.co.za/hubfs/Domestic_MT_Blog_Cover.png)
Pick n Pay is the latest tier 1 retailer to enter the growing domestic money transfer market in South Africa. Why would they and many others expand their value-added services (VAS) portfolio with this payment product?
South Africa’s payments landscape has a diverse set of payment profiles. Cash remains popular however cash users are progressively opting for safer, digital ways to transfer money domestically. As a result, domestic money transfers are growing in popularity and retailers are especially suited and incentivised to serve this market. How?
Competitive commercials and user experience
Money transfer services have the second largest VAS market share in value although volumes are low compared to products such as airtime and sports betting. While a consumer will typically transfer funds once per month, the retailer’s revenue per transaction could be lucrative for a growing VAS portfolio.
For a retailer with an existing portfolio, adding domestic money transfer services incentivizes customers to stay within the ecosystem by addressing both their purchasing and financial needs. Practically, if a customer buys airtime and pays utilities through a retailer’s app or till point, enabling cash transfers through the same channels minimises the risk of them switching to a competitor for similar transactions.
In terms of liquidity, a crucial component is to balance the flow of cash in the ecosystem. Domestic money transfers provide more dual-opportunity to keep cash flow within the ecosystem and possibly reduce costs to manage physical cash depending on the strategy implemented.
Flexible ways to pay
Unlike other VAS products, money transfers are multifaceted, offering retailers the flexibility to choose their level of participation in the payment chain. A retailer can provide an end-to-end, counter-to-counter solution encompassing both cash-in and cash-out services, or opt to offer just one of these services and capitalise on its strengths:
1. Counter-to-counter
This option focuses on counter-to-counter transactions thus creating a greater opportunity to increase foot traffic, purchases, and overall awareness of a retailer’s store network. As a result, customer experience is important - the process of depositing, sending and withdrawing should be easy and consistent across the network. This is key for use cases like the one mentioned in the 2022 Digital Goods and Services Report where industry representatives indicated that “for safety reasons, consumers from the lower-income groups frequently send the cash that they earn from day wages home before their commute and then collect it upon their arrival to prevent theft of cash while in transit.”
Competitively, offering an end-to-end solution could capture a share of the remittance market where transaction fees are typically high. By establishing competitive transaction fees for its network, retailers may gain access to a new market share of remittance users looking for more affordable ways to send money.
2. Cash-in
One use case for this is for retailers to accept cash for use in their own digital wallet, or that of a third party. Retailers who are strategising the building of a super-app or money services app should consider this option.
3. Cash-out
Cash-out services can be strategically used to increase foot traffic while reducing the amount of physical cash kept in-store, thereby lowering the risks and costs associated with managing cash as mentioned earlier. To be competitive, this option requires partnerships with multiple money transfer providers to attract a broad group of beneficiaries. In this scenario, retailers act as an extension of the money transfer network for third parties, typically banks, and beneficiaries can conveniently spend the money in-store for their household needs.
Domestic money transfers are closing the gap in payment services for unbanked consumers looking for new ways to transact digitally and the remittance market looking for better pricing. Retailers are uniquely positioned to provide this service competitively while using and enhancing their brand equity.
Choosing a technology partner with an extensive network of money transfer providers simplifies integrations and drives down costs. Chat with us about our fast-to-implement money transfer solution.
![Kganya Molefe](https://blog.electrum.co.za/hubfs/Blog%20Assets/Author%20Images/Kganya%20Molefe.jpeg)
Kganya Molefe
Kganya is a freelance Content Writer based in Johannesburg with experience in African Payments. When she’s not writing, Kganya enjoys journaling the old-fashioned way, listening to podcasts during her long walks, and passionately discussing the importance of low-cost, real-time, pan-African payment solutions with her friends and family.
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