International Currencies – India’s INR becomes a global currency – and Other Cross-Border Payment News

This Newsletter has written about cross-border payments in Africa for some time. One major issue for e-shops selling across frontiers are challenges to remitting payments. Often it is far easier to use one of the 3 major global currencies ( the US$, European Euro or UK pound) than a national currency. Last year 2 cross-border payment services were launched in Africa – PAPSS and TCIB which are piloting respectively in West Africa and Southern Africa. Both allow merchants to pay in national currencies. This will make life a lot easier for intra-African trade, but meanwhile India has now come forward to offer the Indian Rupee (INR) as an alternative global currency. So far 18 countries have signed up. This is an interesting move as China was also thought to be preparing to allow its currency to become a global currency, which may explain the absence of some countries in the list of countries lined up behind the INR.

The 18 countries are Russia, Singapore, Sri Lanka, Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia,  Mauritius, Myanmar, Uganda, Oman, Seychelles, Tanzania, New Zealand and the UK. The question of course is – will this help e-shops remit payments? Logically the answer is, of course, not necessarily. An e-shop using INR would, first, be limited to the countries that have signed up, and second would simply exchange one global currency for another, with the same additional costs for cross-border sales that using a US dollar or European Euro presently entails. As the system progresses we may see greater advantages to the INR, such as lower exchange commission, for example, but presently the advantages are not evident.

Meanwhile, MFS Africa has partnered with Western Union for cross-border payments. Through this partnership, Western Union customers will be able to send money directly to banks and mobile money wallets within the MFS Africa network. The service will be launched in Madagascar and later rolled out to other African countries. In another development, M-Pesa, Safaricom’s mobile money service, has formed a new strategic partnership with Amazon to offer worldwide remittance services. In May 2021, Safaricom suggested a possible partnership to increase its global presence and recover from its first profit decline in 10 years.The UN has forecasted that global remittances will surpass US$4tn by 2030, and M-Pesa intends to broaden its reach beyond Africa through this collaboration with Amazon. These developments coincide with M-Pesa’s impending separation from its parent company, Safaricom, and the establishment of its independent operations. This move is expected to increase M-Pesa’s influence in the financial market, as it has already established a strong presence in numerous global markets. However, as we report below, M-Pesa has run into some legal difficulties in Kenya which illustrate the problems for fintechs.