In a move that could reshape global money transfers and disrupt Africa’s growing fintech sector, the U.S. House of Representatives has passed a sweeping tax bill that includes a controversial 5% levy on international remittances. While the bill still awaits Senate approval, the provision — tucked deep within more than 300 pages of legislative reform — has already set off alarm bells for the fintech startups and diaspora workers who power Africa’s $100bn remittance economy.
The bill, championed by Republican leadership and President Donald Trump, includes a range of populist fiscal measures: tax exemptions for service tips and overtime pay, incentives for purchasing American-made vehicles, and the introduction of so-called “TRUMP Savings Accounts” for newborns. But it is the proposed remittance tax, targeting outbound transfers from the United States, that may carry the most significant global ripple effects.
For African-focused remittance fintechs — from Chipper Cash to Flutterwave — the proposal raises existential questions about the future of cross-border financial flows. “This could change the economics of remittances overnight,” says a senior executive at one Lagos-based payments firm. “Our margins are already tight. Add a federal tax, and you risk driving these flows off the formal rails.”
Washington’s New Tax Logic
The stated rationale behind the proposed levy is to raise funds for border enforcement and immigration control — two issues that have become political flashpoints in the U.S. But analysts warn that taxing remittances, often sent by immigrants to families in low- and middle-income countries, is a blunt instrument likely to backfire.
“The people sending this money are not the ones driving budget deficits,” says José Iván Rodríguez-Sánchez, a fellow at Rice University’s Baker Institute. “You’re essentially penalising the very workers who contribute economically but rely on financial connections to their home countries.”
According to the World Bank, remittances sent from the U.S. totaled $93bn in 2023, with African nations like Nigeria, Egypt, and Morocco among the top recipients. These funds are used not just for consumption, but also for education, health care, and small business financing — making them a vital stabiliser in many African economies.
For every $100 sent, the new legislation would withhold $5 in federal tax — on top of transaction fees already charged by fintechs and banks. Critics argue this could drive senders towards unregulated methods, including informal agents and crypto-based transfers, undermining efforts to formalise remittance channels.
UK Migration Shake-up Adds Pressure
While the U.S. eyes taxation, the UK has opted for restriction. The government’s recently published immigration white paper, Restoring Control over the Immigration System, proposes a sharp tightening of migration rules, particularly those affecting care workers, international students, and family reunification pathways.
Among the most impactful changes are the closure of the health and care worker visa route — a pathway heavily used by African migrants — and the extension of settlement timelines. The changes come amid public concerns over immigration levels, but they also risk constricting the very flows of people who sustain the remittance economy.
“The diaspora isn’t just a social presence — it’s an economic lifeline,” says a London-based immigration solicitor. “By making it harder for people to come, stay, or work legally, you’re also disrupting how money flows back home.”
Remittances from the UK to sub-Saharan Africa remain significant, with Nigeria, Ghana, and Kenya among the largest recipients. Many of these transfers are made by low-income workers who would be disproportionately affected by new migration rules, including salary thresholds that could disqualify thousands from securing or renewing visas.
Fintechs Facing a New Reality
Africa’s remittance-focused fintechs have flourished in recent years, helping to formalise and digitise transfers once dominated by cash couriers or informal brokers. In 2024, formal remittance flows to Nigeria rose by 43.5% to $4.73bn, while Morocco received nearly $12bn. Companies such as LemFi, Sendwave, and NALA have leveraged slick interfaces and cost-effective pricing to grow quickly in key diaspora markets.
But these same firms are now staring down a challenging policy environment. On the sender side, tax and migration policies threaten transaction volumes. On the receiving side, African central banks are tightening controls on foreign exchange, requiring stricter licensing, and scrutinising fintech compliance.
“We’re being squeezed from both ends,” a West African fintech founder tells Launch Base Africa. “If migrants can’t come legally, and those who are here get taxed for sending money home, how do we sustain growth?”
Even the promise of digital disruption has its limits. While mobile money penetration is high in markets like Kenya, fintechs still depend on local banking partners and favourable regulation. Any instability in remittance corridors — whether due to taxation or migration restrictions — adds uncertainty to their business models.
The Rise of a Two-Tier Remittance System?
If the U.S. tax becomes law and the UK proceeds with tightening its borders, industry insiders warn of a fragmented remittance ecosystem. On one side: regulated fintechs servicing wealthier, compliant customers. On the other: a resurgence of informal networks, crypto solutions, and peer-to-peer transfers to circumvent new costs and restrictions.
This risks undoing years of progress in transparency and inclusion. In Nigeria, only 23% of the $20.93bn in total remittances for 2024 were processed through licensed providers. That figure could fall further, hurting governments that depend on data and formal flows to manage foreign exchange reserves and economic planning.
The World Bank and other development institutions have long promoted remittance formalisation as a tool for financial inclusion. Taxes and policy obstacles, critics argue, could reverse those gains and push vulnerable communities further to the margins.
The Bottom Line
The fate of the U.S. tax bill now lies with the Senate, where it may face revision or stall amid broader partisan wrangling. The UK’s migration reforms are likely to be phased in over 2025. But for African fintechs, the direction of travel is already clear: the regulatory and geopolitical landscape is shifting, and fast.
For a sector that has prided itself on solving inefficiencies in global finance, the next challenge may not be technical but political. “Disruption doesn’t always come from a startup,” says one fintech executive. “Sometimes, it comes from a politician with a pen.”
As remittance-heavy markets brace for impact, African fintechs may need to pivot not just to survive — but to redefine how and where cross-border finance happens. In an increasingly protectionist world, the question is no longer just how money moves, but if it can.