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Paypal enters the African market with Xoom

A new competitor Xoom, by Paypal has announced secure money transfers to the already crowded African money transfer market. The money transfer service announced that the company’s customers in the US, UK, Canada and Europe can now send secure and convenient money transfers directly to mobile wallets in key markets across Africa with a focus on the underbanked segment. Recipients can retrieve cash almost instantly; it can be delivered directly to their door or their phone in the form of mobile credit (this is only available 11 countries).

The subsidiary of Paypal appears to be another competitive player in an even competitive and diverse market rather than revolutionizing the business. One of Xoom’s biggest competitors are Telecoms operators in Africa such as Orange and Safaricom who are already venturing into the inter-African transfer segment, with offers sometimes better adapted to local needs. Safaricom’s Text and Treatment solution allows, for example, to pay for emergency transport for patients in Tanzania and Lesotho.

PayPal’s requirement for users to download Xoom’s mobile app instead of offering the unstructured supplementary service data (USSD) code could limit penetration. Also, apart from limitation in internet access majority of the population in Africa still use regular phones as opposed to smartphones.

And even with the experience that PayPal already has for international remittances, telecoms still dominate the mobile money market in the continent.

In a continent where cash is still King, Paypal’s Xoom will find it difficult to operate if they do not have specific localized strategies to win the already existing mobile money market in Africa, especially the East African region.

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