Wari to Buy Tigo in Senegal: Opportunity for Financial Inclusion?

It was recently announced that Wari has plans to acquire Tigo in Senegal. The transaction has been caught up in regulatory hurdles, but if it goes through it could disrupt the digital finance market in a way that benefits low-income customers.

The success of Wari, an over-the-counter money transfer and bill payment services provider, is based on its large network of agents and how easy it is for customers to use its service. In an economy largely based on cash, Wari allows people to send and receive money without having to set up a mobile money account. This has fueled Wari’s growth, but it has also limited its contribution to financial inclusion, as not owning an account for transactions limits customers’ ability to receive other financial services. Wari’s recent acquisition of Tigo in Senegal, a subsidiary of Millicom Group, has the potential to change the situation. Tigo Senegal, a mobile phone operator representing 26 percent of the number of SIM card in circulation, brings not only its telephone network but also its mobile money wallet, Tigo Cash, and its non-bank e-money issuer license through Mobile Cash S.A.

The alliance of Wari’s large network of agents and Tigo’s e-money wallet has the potential to offer low-income people, many of whom are familiar with Wari, access to an account through which additional financial services like savings, credit and insurance could be offered in partnership with financial institutions. This new component of Wari would complement the company’s e-wallet, which is based on a prepaid card in partnership with UBA. It would expand its offering of digital financial services to segments of low-income population that are unfamiliar with bank cards but own mobile phones.

Wari could add competition to the mobile money market

Launched in July 2008, Wari pioneered money transfer and bill payment services in Senegal. Mobile money providers soon followed, including Orange money in May 2010, Tigo cash in April 2014, and another major over-the-counter provider, Joni Joni, in 2013. The addition of Tigo’s e-money wallet to Wari’s services could turn the company into a mainstream player in the mobile money sphere, particularly given Wari’s expansive agent network and competitive pricing.

Just how large is Wari’s agent network? The volume and value of transactions going through Wari’s platform in Senegal are not publicly available, but the company’s success is reported to be so great that “Wari” has become a byword for "send me money" in Wolof (the country’s most widely spoken language). According to forthcoming CGAP research, 82 percent of agents in Senegal offer Wari services, giving Wari the largest geographical footprint of any digital or traditional financial service provider. By comparison, Joni Joni and Orange have 54 percent and 40 percent, respectively. (Agents are largely non-exclusive in Senegal, with 60 percent being shared de facto; this is the case for 90 percent of Tigo agents that are already shared with Wari.)

If Wari leverages its large agent network, its competitive pricing, and the Tigo Cash mobile money wallet to become a mainstream player in digital financial services, it would add competition to the market. It could compete with the two other mobile network operators, not only for domestic transfers but also for cross-border transfers within the West African Economic and Monetary Union (WAEMU), thanks to its presence in 60 countries around the world, including in the eight WAEMU countries.

By entering the mobile money sphere, Wari may also face new challenges

In fact, Wari is already facing challenges. The transition of Tigo telecom’s license to Wari requires prior approval from the telecom regulator, as the telecom license is not transferable. At the time the acquisition was announced, formal approval had not yet been obtained. There is also the question of Tigo’s e-money issuer license. In February 2014, Tigo became the first mobile network operator in WAEMU to obtain such a license, through its subsidiary Mobile Cash S.A. Will the acquisition of Tigo mean an automatic transfer of the e-money issuer subsidiary or will approval from the Central Bank of West African States be required? Will a renegotiation of the terms of collaboration with Mobile Cash S.A be sufficient, followed by information brought to the attention of the central bank? This situation is unprecedented in WAEMU and will be interesting to follow in the weeks to come.

If the deal goes through, adopting a more complex business model that allows customers to perform self-initiated transactions on a mobile wallet will bring more challenges for Wari. The more sophisticated services would make it necessary to deploy additional training and support to customers and agents. Wari would also need to manage the fast-evolving risks and fraud issues associated with e-wallet-based services.

Despite the challenges, Wari’s acquisition of Tigo is an interesting case to monitor to measure how much an existing over-the-counter agent network can leverage mobile money for contributing to financial inclusion of low-income people. Ultimately, success will depend on the choices made by customers.