Top 5 takeaways from the RemitONE Compliance for Money Transfers panel at IMTC EMEA 2021

Earlier in the year, a few of the key players in the remittance industry digitally gathered together to discuss a wide range of key topics within the field of money transfer compliance in a panel hosted by RemitONE. The panel included deep dives into anti-money laundering practices, responding to suspicious activity, OFAC compliance (Office of Foreign Assets Control), and much more.

Moderator:

Oussama Kseibati, Head of Services at RemitONE

Panellists:

Ibrahim Muhammad, Independent Payments Consultant, Al Fardan
Nadeem Qureshi, CTO, USI Money

To condense the panel into a few paragraphs would be a tricky task indeed, so we’ve decided to focus on five of the key takeaways that our panellists settled on during their discussion.

1. Cybercrime requires a threefold solution – Ibrahim

There are two different types of financial crime. Broadly speaking, on one hand, there are crimes related to money laundering, terrorist financing, fraud and cybercrime. On the other hand, there is financial crime related to bribery and corruption. When it comes to the money service sector it’s the former type of crime that’s been on the rise recently, thanks to the pandemic and the increased digitisation of companies.

How do we prevent these attacks? It’s a threefold solution. First, companies need to ensure the right people are in charge of their systems – this means people with a clear understanding of risk assessment. Second, they need to put well-documented processes in place, guided by policies and procedures. And finally, the systems need to be robust enough to identify, prevent and deter financial crime.

2. Plugins have made all the difference – Nadeem

The availability of plugins is gradually taking us away from an environment of weekly updates and into a more active, real-time environment. What used to take weeks can now take place in the space of days or even hours, with lists being updated and names being added constantly.

Working with something which is real-time means it’s so much easier to identify a weakness faster. These days you have customers registering and processing within a matter of minutes. But as we’re working towards that more efficient way of processing, it’s vital that the system is robust and is set to your needs as opposed to the system needs.

3. There are two sides to the story – Oussama

There are two main sides to the new compliance regulations that we’re seeing. It’s not just where you yourself operate, it might also be where and whom you’re sending to. What kind of regulations do they have and what are their maximum receive amounts, for example?

We have to understand this because there’s an ever-changing landscape right now with new rules and regulations being set all the time. Unless you’re on top of those changes, then you’re always going to be putting yourself at risk when partnering with someone. It’s also worth noting that a lot of the regulations come from the central banks and they will have their own lists and connections that you’ll need to take into account.

4. Transaction monitoring and risk profiling are key – Ibrahim

Transaction monitoring is a key part of KYC and should always be an ongoing process. When we onboard the customer, that doesn’t necessarily mean we’ve 100% verified them. It’s the ongoing transactional behaviour of the customer that allows us to do that and this is where profiling plays such an important role.

You need to do a proper risk profile or categorisation based on the transactional behaviour of your customers and categorise these customers into different risk profiles at both the customer level and the transactional level. Of course, there are multiple systems, including RemitONE’s, that can facilitate the onboarding process and ensure that the customers are who they claim to be. But they can also track where money is going so that, for example, if the destination country is high-risk then additional checks can be put in place and appropriate limits can be set.

5. Creating an effective monitoring programme is all about asking the right questions – Nadeem

The first thing to do when building a transaction monitoring programme is to really look at whether you’re a B2B, B2C or B2B2C service. Once you can answer that question and are able to identify your customers, it’s much easier to break everything down. After this, you need to answer the question of the dual jurisdiction process – the rules and regulations in the sending and receiving countries.

Finally, once the system is configured, you need to ask whether or not it needs to be looked at a little deeper. Because so often you’ll rush to go live and there will be a tech anomaly that was overlooked or a parameter that wasn’t set right. Once you can confidently answer all of these questions, only then can you create something in terms of a robust framework, whether it’s for monitoring or compliance.

We’d like to extend a huge thanks to Ibrahim, Nadeem and Oussama for their time and insights.

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Video: Perspectives on Digital ID – What the future may look like (eKYC and AML)

Continuing our recent discussions exploring some of the challenges and opportunities being faced by the remittance sector in these uncertain times, RemitONE hosted a webinar on the 24th of June 2021 regarding the ever-shifting perspectives on digital ID in the remittance sector, particularly in light of the COVID-19 pandemic. The panel was made up of experts from both RemitONE and our friends and partners in other global companies. In case you missed the webinar, here is a summary of the key insights.

Webinar moderator:

Saiful Alom, Head of R&D at RemitONE

Panellists:

Richard Spink, Sales Director of Channel and Partnerships, GBG
Osama Al Rahma, Head of Business Development, Emirates Bank
Reynell Badoe, Payments Manager, Stanbic Bank

Why is digital ID important?

Osama Al Rahma: Digital ID is of course incredibly important through its use of KYC (know your customer) and the ability to identify the customer. In fact, it’s largely through the use of digital ID that we have been able to protect the financial regime from crime on a wide scale. The shift towards digital already started pre-pandemic and has only increased in recent months. No longer are banks encouraging the use of traditional brick and mortar branches. Instead, they are relying heavily on their digital offerings, which by default means that the ability to identify the genuine user of such services is more effective. We’re also seeing a shift to digital with eKYC (electronic know your customer) on a much larger scale when it comes to remittances. This will allow us access to machine learning with Artificial Intelligence, which is incredibly powerful when integrated with real-time streaming. Using this technology, we’ll be able to conduct more diligent processes within transaction screening and monitor the behaviour of certain users in greater depth. For the sake of financial security on the compliance side, this is incredibly important.

Richard Spink: At the end of the day, digital ID reduces compliance costs so it’s always going to be important from a purely financial perspective. However, there is no widely regarded standard for digital ID so far, at least as far as MTOs are concerned. What MTOs have generally been using as the core tenants of their ID is proof of identity and proof of address, which are attributes that can be used by financial services around the world. Of course, a standard would be ideal, but as there are so many different regulations in different countries, this is unlikely to happen anytime soon. As an aside, it’s worth noting that while Revolut has a lot of customers, they’re not profiting very well and the reason they’re not making enough money is supposedly due to the cost of compliance. Digital ID will help businesses globally and save money on the process of knowing who their customers are and the cost of compliance as a result. And I think the technology to do this already exists.

Saiful Alom: It would be ideal if there was a way to digitally identify a person, ensuring that they have met all KYC and AML needs. However, due to the world we live in, there are a lot of complications to work around.

What is the adoption of digital ID like in your respective markets and has COVID accelerated your options?

Reynell Badoe: From a Ghanaian perspective, if you look at the stats, the number of people with access to the internet is proportional to the number of people with access to so-called big data. Having access to the internet means giving up your information and as a result, you also have access to financial services and remittances. It’s a worthwhile trade-off for most. However, there are 1.2 billion people in Africa, and only a handful have access to the internet. While COVID certainly things and meant there had to be a quick adoption of digital money transfer channels from traditional methods, we still have a lot of catching up to do digitally. With regards to how? The pandemic has meant more people have had to use data platforms and open mobile wallets, creating a digital shift of necessity, so the groundwork has already been laid.

Have there been any challenges in terms of Trust Private Security?

Osama Al Rahma: Trust, privacy and security are the three main pillars when it comes to finance and that will never change. The challenge is that by the time that technology evolves, different unforeseen issues tend to arise. For example, using AI for facial recognition might be incredibly convenient when it comes to opening your phone with a glance but the negative consequence is that it is another means for fraud to occur. When we speak up about this, we need validity.

Saiful Alom: In terms of Trust Privacy Security, this is a concern for all of us as consumers – particularly seeing as online services have been adopted at such a large consumer scale since lockdown began. Trust has increased in these online services and so consumers use them more regularly. However, there are many issues to consider and chief among them is privacy. Because your data is a lot more venerable now and consumers transferring money online may question how secure their transactions really are, and if it can be hacked or breached.

Is digital ID a potential solution or a problem to identity fraud?

Richard Spink: If you’re lending money, then I think that there is certainly high risk. It’s a different process to opening up a bank account or sending money on behalf of someone else. The key thing is to ensure you are actually sending that money to the correct person and thankfully, there are more reliable tools that are able to detect these issues now. It comes down to the organisation’s fraud screening processes. The question is how much information are you able to acquire and what does that fraud screening process look like? The standard answer is that there is no silver bullet – there isn’t one organisation that has everything available to run the process at zero risk. However, in the same way, there is always risk in a face-to-face transaction too. As we all know. “Good friction” is necessary for both scenarios. What has changed in the digital process is that it is now acceptable to present an identity, run that process with a mobile phone and check for duplicates. In the future, things will get even more secure with the use of biometric technology and face recognition, thumbprint recognition and the ability to check a chip on a passport. This last process is something we’ve started working with recently. In all, there is a lot more information that is available when trying to detect fraud these days, however, the same rule still applies: you need to decide what information you want to capture and make a decision on it.

The government has been known to over-regulate and stifle innovation. Do you think that we have the right balance when it comes to trust vs innovation?

Reynell Badoe: I think that the government has a lot of responsibility to provide the basic and necessary requirements and nothing more. On the issue of trust, we’ve seen leakages in the past – breaches of customer information from companies. So, on a consumer level, there is the issue of trust to contend with, as people are sceptical as to whether or not their information is safe. An example of this is free apps – technically they’re not “free” in the sense that you give up some aspects of your digital ID data in exchange for access to that app. I’d say the question is: can the information be used against me in the future? In terms of innovation, there’s a need for better services – we need a safer place to operate without having to worry about any of these concerns and challenges. There needs to be a fine balance between regulation and opening up certain aspects of digital ID.

Where does the government sit within this space in terms of digital ID?

Osama Al Rahma: When it comes to the government, it comes down to the level of leadership of that nation and their perspective on digital transformation. They then need to lay down the military frameworks, the standards and the security aspects in order to develop a secure environment. It’s been said that once you introduce digital financial services then it’s not a case of if you will encounter fraudsters but when. There is a lot of truth to this adage, as I have seen myself when we launched a remittance app and immediately fraud occurring on a massive scale. The reality is that if you are not well-enough equipped in different aspects, you will likely encounter problems. One of those aspects is having clear risk mitigation policies, and the second is to use advanced technology to identify such risks. A third aspect, meanwhile, is knowledge and awareness. Most issues I’ve seen actually involve the consumer allowing the phishing to happen due to his lack of knowledge on how scams can occur. It’s all about protecting your consumers.

What advice would you give to MTOs and banks who are thinking of adopting digital ID within their processes?

Richard Spink: My advice would be to keep things simple and understand the regulation before you talk to a business like us. Everyone will give you different advice on regulation. In my world, I need to understand the regulation of the market the jurisdiction is operating in. For example, if your business is registered in Germany, the German financial regulation is very specific on how want that ID verification process to run. In fact, they want it done via video. But this isn’t the case for the whole of the EU. So, although the EU is one trading block, in theory, in practice there are different processes required depending on where your business is regulated. I’d also recommend considering what you need to do to confirm that someone is who they say they are. In my experience, finding proof of address is the hardest process and yet it’s required by most regulators. My experience in the last ten years shows that the proof of address data is large in quantity however there is still nowhere near enough to satisfy the global coverage.

What are the critical questions you will ask an ID verification provider?

Osama Al Rahma: Before asking the questions, develop your own strategy and consider what you will want in the near future, including your offerings, products and other engagements with the consumers as this will dictate the type of provider you want to consider. On one hand, look at the flexibility of upscaling the technology, as you want someone to partner with as opposed to a short-term solution that will leave you stuck with a legacy system that will hinder your ability to enhance your offerings in the future. On the other, look at the ability of the service provider – have they got a system that is dynamic enough to cope with the constantly shifting regulatory requirements?

What do you think this space will look like in two to five years?

Reynell Badoe: At this point, it’s all speculation, especially with the speed at which technology is advancing. For example, things that one would have expected to happen in a decade could happen as soon as next year. At this point, there’s already a lot of personal information online both knowingly or unknowingly. Now, people are less concerned about giving away their data and are more concerned about where it’s going. For example, if there’s a new online financial institution that people are gravitating towards then I, as a customer, would want to find out a bit more before parting with my information. This has led to the use of federated IDs where I can sign in to a website using my existing Google account because I would naturally be more comfortable leaving my limited information with Google as opposed to this relatively unknown third party. I personally expect to see a lot more use of federated IDs in the future.

How do you see the rate of digital adoption in sending and receiving markets, in terms of duration, post-pandemic and pre-pandemic?

Osama Al Rahma: During the pandemic, I think the main shift was that consumers released how digital engagement was beneficial to them. Why do you think China was able to so effectively control COVID-19? It’s because of their AI and biometrics. They were able to use this to track and trace the people who had been in touch with an infected person and find out which areas they were prominent in. The only positive, economic growth in 2020, in comparison to other developed countries, was China and one of the primary reasons was this biometric ability. This is already being applied elsewhere today – going through an airport completely contactless, for example. With regards to the future, the adoption of these new methods should be reviewed seriously by all financial companies. It might be a slow burn but always look at how they will impact your business model and how you will be able to use them to your advantage in the future.

What next?

Now that you’ve read our article we want to help you get the most out of it and deep dive into the trends and predictions shared.

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RemitONE integrates with payment gateway Vyne

RemitONE, the leading global, technology and business services firm for the remittance world, today announces its integration with Vyne, the specialist account-to-account payments platform.

The deal gives RemitONE’s 100+ remittance clients instant access to Vyne’s payment solution, becoming the fastest, most cost-effective way for their customers including Payment Institutions (PIs) and Money Service Businesses (MSBs) to send remittances globally.

Vyne uses Open Banking to move money in real-time between bank accounts, bypassing long-established but now outdated card networks and their associated fees. Vyne’s single integration means RemitONE’s clients can access the benefits of Open Banking including more secure, cost-effective, faster payments. With transaction times cut from days to seconds, RemitONE’s clients’ customers can send money abroad quicker than ever.

Because Vyne allows customers to make payments directly from their own verified bank account, “know your customer” (KYC) checks and “Secure Customer Authentication” (SCA) fraud authentication can be carried out quickly and seamlessly, reducing friction and vastly improving the customer experience.

Aamer Abedi, Chief Marketing Officer at RemitONE, says: “RemitONE is always seeking the most innovative payment products for our clients. The technical ease of Vyne’s payments platform allows MSBs to get up and running quickly, and offer their customers an efficient, robust and cost-effective way to transfer money. 10% of our MSBs took the first steps to integrate with Vyne within two weeks of the integration going live, with more client MSBs wanting to take advantage of Vyne’s Open Banking Solution every day.”

Karl MacGregor, CEO at Vyne, says: “The international money transfer market is booming. Globalisation and the rise in digitalisation means there’s an increasing need to send money abroad as quickly, easily, and cost-effectively as possible. This integration combines the power of RemitONE’s renowned money transfer solution and global network, with the easy integration, instant settlement, and fraud resilience of Vyne’s payments platform. Together we are opening access to a new way to pay, allowing remittance businesses to offer the significant competitive advantage of safer transfers and more seamless customer experiences.”

Take advantage of the RemitONE and Vyne partnership by contacting marketing@remitone.com

About RemitONE

RemitONE is the leading provider of money transfer software solutions for banks, telcos, and money transfer operators (MTOs) worldwide. Organisations of all sizes use the RemitONE platform to run their remittance operations with ease and efficiency by reaching out to their customers via multiple channels including agent, online and mobile. For more information on RemitONE, please email marketing@remitone.com

AML and CFT Guide for Money Transfer Start-Ups

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT), are terms mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect, and report money laundering and terrorist financing activities.

Every regulated entity should have appropriate AML as well as CFT checks and controls in line with the regulatory framework of the jurisdiction where the entity operates from.

To make it easier for Start-Ups, please find below the diagram of the AML/CFT Ecosystem:

The ecosystem shown above shows the five core responsibilities of Money Transfer Start-Ups:

1. Onboard a Money Laundering Reporting Officer (MLRO)

First and foremost, all start-ups must have a dedicated Money Laundering Reporting Officer (MLRO) who is responsible for managing all compliance activities within the organisation. Depending upon the type and size of the business, there could be one or more members within the compliance team.

Aside from the MLRO, it is important that other stakeholders such as Directors, Senior Managers and even Shareholders familiarise themselves with the Payment Services and AML regulations within the jurisdiction where the business is registered.

2. Customer Due Diligence (CDD)

Each entity is responsible to identify the customers that they deal with. This step is known as the Know Your Customer (KYC). The MLRO has to identify the checks and controls that need to be in place to capture all the information needed from the customers as part of the KYC process.

Apart from KYC, the entity must also maintain the Customer Due Diligence which is mainly to do with checking the customers registering against the watch lists and the transaction patterns of the customers.

3. Suspicious Activity Reporting (SAR)

The entity is required to conduct appropriate investigations whenever an event such as a transaction monitoring alert or a sanctions match occurs. The MLRO has to validate such investigations further and need to report to the local regulatory bodies in the form of Suspicious Activity Reporting (SAR) or Suspicious Transaction Reporting (STR).

4. Record Keeping

The entity is responsible to maintain records of all their customers and transactions for a minimum period of 5 years or as per the guidelines of the local regulatory bodies. The MLRO has to ensure that the data captured from customers for identification and transaction purposes are stored securely and accessible to the authorized individuals of the entity whenever needed. Apart from customers and transactions data, the entity should also maintain the records of all the SARs/STRs.

5. Registering and Reporting to Regulators

The entity is responsible to have the registration done with the relevant regulatory bodies in the jurisdiction where the entity operates from. The entity should also be aware of all the reporting obligations in order to submit reports related to the customers or transactions data to the relevant regulatory bodies in the jurisdiction.

Whether you are a start-up or an established Money Service Business, it is very important that the AML policies and procedures are clearly incorporated within your business model. For more information, advice and support, please contact us.

RemitONE provides proven compliance products for Money Service Businesses and Central Banks and would be delighted to help your business. Contact marketing@remitone.com or call +44 (0) 208 099 5795.

RemitONE – AZA Partnership to Provide an End-to-End Money Transfer Solution

RemitONE, the leading provider of money transfer software solutions, announces its partnership with AZA, Africa’s largest non-bank currency broker.

This symbiotic partnership is a compelling proposition for money transfer operators sending money to Africa. Customers can now benefit from both RemitONE’s multi-channel money transfer platform and the ability to send money, airtime, bank transfers, and mobile transfers to Africa through AZA’s payout network.

AZA is a fully regulated Authorised payment institution by the FCA for the UK & Bank of Spain for Europe that specializes in both P2P & B2B last-mile payouts through its API solution across eight regions namely Nigeria, Ghana, Senegal, Uganda, Morocco, South Africa, UK and SEPA Region. It has immediate plans to expand to Côte d’Ivoire, Mali, Togo, Cameroon, DRC & Egypt within this year. AZA currently works with top-tier MTOs including Western Union, World Remit, Azimo, IDT (Boss Revolution), and is excited to add RemitONE to their list of partners.

“Our partnership with RemitONE takes us one step closer to simplifying cross-border payments in frontier markets,” says AZA CEO Elizabeth Rossiello. “Being a market maker, our focus has always been to offer the most competitive pricing to our customers and we are looking forward to serving more customers globally in partnership with RemitONE.”

RemitONE customers who are looking to take advantage of AZA’s competitive rates and payout network can easily integrate with AZA’s plug-and-play solution and gain access to these benefits immediately.

“We are very excited about this partnership, RemitONE and AZA are aligned on the core value of using technology to empower remittance and our aim to make it easy and cost-effective for people to send money home,” says RemitONE CEO Anwar H Saleem. “Our services complement each other and our partnership will ensure that we deliver a rich customer experience.”

Customers can benefit from both RemitONE’s highly successful and compliant money transfer platform as well as the ability to send money, airtime, banks transfer, and mobile transfers to Africa through AZA’s vast payout network.

Take advantage of the RemitONE and AZA partnership by contacting marketing@remitone.com

About AZA

AZA is an established provider of currency trading solutions that accelerate global access to frontier markets through an innovative infrastructure. By leveraging cutting-edge technology in their flagship products, TransferZero and BFX, they are able to significantly lower the cost and increase the speed of business payments to and from frontier markets. TransferZero is their B2B2C product, which provides both wholesale currency purchase and retail settlement via their robust API. BFX is their B2B over-the-counter platform for businesses with wholesale currency needs, especially those paying partners and suppliers. Their partners utilize AZA’s hybrid financial infrastructure and deep local knowledge to manage liquidity and send payments to dozens of bank networks and mobile money operators across Africa. They are licensed by the UK’s FCA and the Bank of Spain. For more information, visit: www.azafinance.com

About RemitONE

Brexit is a done deal, but what does that mean for the remittance sector?

To say 2020 was a challenging year would be something of an understatement. If the pandemic wasn’t enough, we were then thrown headfirst into a Brexit deal that potentially threatens all UK businesses which trade with the continent. We’re on the other side of a very long, complicated and messy divorce but there are still so many things to unpack and digest, particularly as far as the financial sector is concerned.

Back in 2016, when the referendum result was first announced it was a shell shock to the money transfer and wider financial services industries. But that was almost five years ago now and while London certainly doesn’t look set to be dethroned as a world business capital any time soon, there has certainly been a minor exodus as the UK becomes more of an isolated island.

The immediate ramifications of Brexit

Before the ink could dry on the referendum result, money service businesses across the country began to prepare their backup plans. Of course, those that only served customers in the UK would remain unaffected, as would those operating as SPIs. But those operating under the category of APIs that had a large customer base or agent network in the continent had to apply for new MSB licenses from scratch.

Back in 2017, we posited that it would be the change in banking passporting that would have the most significant impact on money transfer and the wider financial services market. Passporting rights in the years before Brexit helped UK businesses to expand into EU states quickly and at minimal cost and post-Brexit, those privileges would be all but expunged.

Making sense of the Brexit fallout

The immediate fallout of the 31st of December was, as was predicted, that MTOs lost passporting rights. This had a major knock-on effect, with all the MTOs that had accounts within Europe and were safeguarding their funds. A month or so later, we’re now seeing those accounts either being closed or laboured with exorbitantly hiked-up SEPA payment fees.

The UK is also going to find itself fighting for itself as far as regulations are concerned. The European payment regulator that oversees the SEPA payment network will have no interest in fighting for a country that essentially tossed it to one side, after all.

The vast majority of UK-based MTOs will undoubtedly have lost European clients over the last 12 months and most European MTOs will have lost many UK-based clients too. Indeed, all MTOs that rely primarily on inter-European banking will probably lose many more in the ensuing months.

The impact has been compounded by the COVID-19 pandemic and subsequent global lockdowns. One thing this has done, however, is catalyse a deeper digital penetration in the money transfer sector, with estimates that the digital hold on the sector grew from 20% to 30% from 2019 to 2020. That means remittance software and fintechs are going to play a larger role going forward. But that’s not necessarily a bad thing and it might not be the only silver lining.

Is there a plus side for remittance?

While it might have moved on from the EU from a regulatory perspective, the UK is still an important part of the payments network and London will remain well-positioned for money transfers. Indeed, for MTOs with a higher volume of foreign exchange transfers, London is still arguably the best place to do the business thanks to its abundance of high net-worth individuals and the number of major international businesses that call it their home.

We’ve also seen many companies abandon the UK for greener pastures and some European countries (such as Spain and The Netherlands) have greeted these companies with open arms. Other companies, particularly smaller ones, have turned to mergers or partnerships with larger competitors to be able to access their European clients.

Thankfully, as the UK was wise enough to adopt the PSD2 open banking regulations back in 2018, the businesses that could afford to expand into other EU states could do so without being tangled up in miles of expensive bureaucratic red tape. But it’s still an expense that many smaller MTOs could have done without.

Then there are those who have proselytised the idea of pivoting away from Europe entirely. Michael Kent, the Cofounder of Azimo, for example, believes we should be looking towards Africa, where remittance is proving to be a crucial lifeline in the absence of governmental pandemic support.

According to RemitONE CEO Anwar H Saleem, however, there is no need for MTOs to panic as long as they can learn to adapt and lean into the changes. He explains: “London has always been a major financial hub for Europe and this is not going to change any time soon now that we’re no longer a member of the EU. It will, however, push those businesses that remain in London to innovate and lead the way. RemitONE are already committed to charting this new course with confidence.”

Can UK money transfer businesses survive Brexit?

While it didn’t end up being the highly prophesied ‘no-deal Brexit’ for most, for the financial services and remittance sector, it might as well have been. With no agreement on the regulatory equivalence between the EU and the UK, there is still a lot of work to be done.

For those operating in both the UK and the EU, there are certainly some tough choices to be made. But ultimately, it’s going to be up to the UK and the MTOs that have chosen to stay behind to ensure it remains relevant and doesn’t lose its standing on the global remittance stage. Whatever the next few years have in store for us, the best thing any MTO can do is arm themselves with the facts and prepare for every and any eventuality.

If you’re uncertain about the future and are looking for support regarding licensing issues post-Brexit, RemitONE is ready to take your call. Using our industry-leading bespoke and secure money transfer software, we can help any established firm or new entity looking to establish in the UK or Europe to navigate the increasingly complicated logistical and regulatory waters spun up by Brexit.

For more information or to speak to one of our experts please email marketing@remitone.com

Remittances: Getting digital-ready for post-pandemic recovery

The world bank has predicted that remittances are set to decline by 20% as a direct result of the pandemic, marking the sharpest decline in recent history. This is understandable on a surface level, of course, as remittance payments are most commonly sent between families and friends, and in the current climate, for migrant workers particularly, the pandemic has caused a dramatic fall in wages and employment.

However, the remittance sector is nothing if not resilient and for some, the pandemic has proven to be something of a catalyst for a sea of change that’s been simmering just under the surface for years now. Could COVID-19 be the final push the sector needs to jump off the digital cliff edge once and for all? With ‘Neobanks’ like Monzo, Starling and Revolut paving the way, the waters are not quite as untested as you might think.

Of course, our industry has various supply chain members, all of which will have a different opinion and angle on the story. As a leading technology vendor, we reached out to an aggregator (Sidharth Gautam from AZA Finance), a payment processor (David Lambert from Transact 365), an ID verification provider (Richard Spink from GBG) and a Money Transfer Operator, (Nadeem Quershi from USI Money), to ask them how they were preparing for a digital post-pandemic recovery and where they see the biggest innovations happening moving forward.

How do you see the future of the payments industry evolving?

Nadeem

The COVID crisis has had a profound impact on the escalation of digitisation in the payment industry. Our previous primary method of processing payments was rather manual, but in the wake of social distancing, we’ve been forced into ensuring our processes are more digitised. I think that’s going to have a major short and long term impact with digitisation continuing to escalate at a rapid pace.

Richard

It’s always going to be down to what the individual MTO wants to achieve when they run a compliance process. There’s a difference between just running a process and being compliant and our experience is that some businesses will want to take that seriously and others will want to just pay lip service to it. There are two reasons for that – one is that there’s a cost to being compliant and the other is that there’s a proliferation of vendors out there now. When I started in the UK 10 years ago there were perhaps 10 vendors. Now there are around 50 money transfer operators in the UK alone and hundreds globally.

How do you see the digital channel fees changing for MTOs as the channels shift from agents to a heavier reliance on digital channels?

David

The fees themselves always come down as volume goes up. When you’re talking about lower risk payment processing the margins are always going to be razor-thin. Already today I’m seeing fees online that are almost rock bottom and it’s only going to get slower. Then there’s the prospect of open banking which is going to blow everything open and remove the baseline costs even further. Ultimately it’s a competitive and a healthy environment and the fees are going to be falling but we are in this to help each other and make money. So while the fees might be coming down, we should always keep our shared end goals in mind.

Sidharth

70% of the remittance market today is cash-based but the tide is shifting and as it does the fees are going to go down. We’re already seeing it move southwards and as the 30% increases and the 70% reduces it’s going to exacerbate that reduction exponentially.

Richard

Prices will go down, of course. But they’re not going to suddenly plummet. There is a point at which we won’t go below (that rock-bottom David referred to) then there’s the cost of going digital that smaller MTOs have to consider. The price point will come down over time but then the technology you choose to invoke will change over time too.

The other thing that’s happening at the same time is that businesses are talking about digital ID. So the technologies to digitise identities is already there but the confidence to accept it probably isn’t just yet. In the next 12 months if you’re looking at how to make your process complaint online you have plenty of choices and the decision needs to be whether you’re looking for a quick fix or a process that’s scalable in the long term?

How does risk play into digitising money transfer?

Nadeem

The real question is do MTOs assume more risk online than in the traditional model? I believe that they don’t. We’re living in an age where digital risks have been largely mitigated by the complexity of new digital IDs. So I honestly don’t see it as any riskier than the traditional model of somebody visiting a brick and mortar location and presenting a physical ID. We have automated lists with regards to sanctions and screening so can build watertight systems to manage risks that are arguably just as proficient as the traditional model.

David

I partially agree with Nadeem. However, I’d argue that the moment you remove the cardholder from the equation in a physical capacity, the risk naturally increases. We can never be 100% sure on the surface if the cardholder who is making the transaction is the actual cardholder. Not if we can’t physically see them.

Where Nadeem is correct is in the responsibility of technology in ensuring those risks are reduced. If the tech is implemented correctly and the right controls are in place then there is going to be less risk. But fraudsters are very smart and they’re always getting smarter. I’ve worked in money transfer for a decade now and have seen so many different ways that fraudsters can behave – loopholes and tricks that technology can struggle to keep up with. The risks are manageable if you do it correctly but if you get it wrong then the risks can be ten times higher.

Sidharth

My response would be somewhere in between Nadeem and David’s. Our business is focused primarily on Africa and in that region, we’re seeing a lot of digital MTOs joining our platform, more and more every day. AI will definitely play a part in mitigating the risk but the risk is always going to be there. The question is how fast the technology can improve.

Richard

As soon as you’re online you’re introducing more risks, but the technology is there to mitigate the risk. As a rule of thumb, If it looks dodgy then it probably is. As long as you run a verifiable process online to mitigate those risks then it’s worth any cost. All online businesses must accept that fraud is part and parcel of the deal. As long as you accept that, go into it with your eyes open and put the right amount of resources behind it then it’s always going to be worth the risk.

Does the digital model present more opportunity for MTOs or are we operating in a saturated market?

Nadeem

The amount of MTOs that have gone digital in the last 9 months is probably more than in the last 9 years and COVID has played a major role in that. A lot of these conversions are not new entrants into the market but are existing MTOs that has been operating more traditionally and have been forced into the digital model.

David

There’s always an opportunity to be found in chaos. Throughout history, hundreds of companies have been forged in times of crisis. Disney was formed out of the 1929 depression, Microsoft came out of a major recession in the 70s and in 2008 it’s the banking crisis that kicked off Bitcoin and Fintech. The way that compliance has moved forward so fast in recent months has really spawned a rise in applications for electronic money licenses.

The implications of that are massive and have led to an environment where everybody wants to be a digital bank. It’s like when the Beatles came along and everybody wanted to be in a rock band. Now, thanks to the Monzos and Revoluts of the world, everybody wants to be involved in Fintech. This is perhaps why, now that we’re all in crisis mode, that so many MTOs are looking to upgrade their money licenses so they can perform different functions and expand into something more.

Sidharth

Asia and Africa are frontier emerging economies. Whilst the vaccine will be a reality in the western world it’s going to take a lot longer to filter into the emerging markets. Given that they are the primary markets for our industry it’s even more apparent that digital is the way to go. Because whilst the western world might be able to return to some semblance of normality sooner rather than later, the emerging markets that rely on remittance are still going to need to rely solely on digital.

Richard

In theory, as long as a financial service business has a steady platform, they can drive the business in any way they want. I think the difference is whether your focus is on driving transactions or taking the bolder step of becoming a fully regulated business. Revolut is a good example of a business that has spent all of its time and effort acquiring customers and are now embarking on the hard bit of actually becoming a proper bank.

I think that everyone would like to see an organisation do that successfully – pivot from a business that has a large number of customers into one that actually makes money from lending money. There’s an opportunity there to scale a business from an MTO into something that provides other financial services too.

Are we seeing MTOs evolve into these Neobanks or are we saying that the pie is quite big and each will have its own role within that pie?

Nadeem

We are seeing the more established MTOs move from conventional standard payments into things like e-money wallets and they are using this type of functionality as part of their wider growth plans. But generally, I think we will be seeing some form of consolidation amongst the larger MTOs. In the larger sense, the more established players have access to more resources so they will be the ones that will be moving forward.

David

Sometimes I feel like an outsider and sometimes it’s good to have that perspective where I’m not immersed deeply inside the money transfer sector. But I advise, consult and work with several different money transfer companies. One of the things that’s interesting that I see from my perspective is that everybody has their strengths and their positions within the market. If you look at companies like Small World, for example, they work with so many smaller MTOs to provide payouts and if you look at Azimo they rely on a number of different partners to help them get into certain parts of the world.

No one can do everything by themselves as one complete unit. So consolidation and licensing are interesting for me because every single MTO out there is trying to do something relatively unique. One company might be stronger in one area than another and by working together they can offer something more holistic and of greater quality overall. So I think consolidation should 100% be on the roadmap for everyone. My only fear about consolidation is that it actually shrinks the competitive element of any industry but I think that’s a little further down the line.

Sidharth

It’s already happening. Around two and a half months back WorldRemit acquired Sendwave for $500 million. This was a growth acquisition and it’s one of many floating around right now. There is also word on the grapevine that Western Union may buy Moneygram, which is one of the top three MTOs in the world.

David

Sidharth said something interesting about acquisition for growth rather than acquisition for revenue and I have seen that a lot in the payments industry. There is a huge amount of consolidation of payment service providers buying other payment service providers simply to grow because growth is so essential for a lot of MTOs, especially when we’re operating on such thin margins.

With all this technology at our disposal, why are we still having an issue with de-risking?

Richard

Since I started talking to MTOs in 2012, I’ll be honest, it’s not got any easier. The first question I ask people as a qualifying question is ‘have you got a bank account’. If they haven’t got a bank account then they’re wasting my time because I know they won’t be using our software until they get that bank account.

The big banks just won’t take the risk. It’s too much hassle and that’s a business banking problem anyway. They could easily take the risk if they choose to, it’s whether they have the resources to be able to deliver that and that’s where you’ve got the disruption coming. Can smaller banks take on that risk? Because in another sense they have less risk in it potentially going wrong.

Nadeem

De-risking has been going on for a number of years but at the end of the day, from a bank’s perspective, it comes down to purely to risk versus reward. For this reason, I don’t think you’re going to see a change in banks attitudes or habits when it comes to de-risking. David also correctly mentioned the rise of the Neobanks and some of these smaller challenger banks but they come with their own set of limitations.

What about regulators? Should the onus be on them to make sure that this continues to be a vibrant and healthy 600 billion dollar industry?

Nadeem

Regulators are there to create a framework, structure, processes and regulations. When it comes to safeguarding good practices, regulators are increasing some of these rules and regulations but can they force banks to actually support clients? I don’t think that’s their objective or their remit.

David

I don’t think it’s in the regulators best interests to push the banks, I think when a company becomes FCA regulated it has to be independent of the banks in some respect. Because, if the FCA and banks were in cahoots with each other it would be it much easier to operate but you’d also leave yourself much more open to fraud. If the two remain independent and they are independently scrutinised you have a sort of double lock system.

Sidharth

Regulators are becoming more and more progressive enablers to our industry. At least in my experience. In the UK and Europe, we have the example of open banking which is fuelling innovation and is also making the industry more compliant. All the stakeholders are becoming more and more transparent and it is helping to increase the credibility of the segments.

Africa and Asia are still very very fragmented. 54 countries with 54 different regulations. So they have a lot of catching up to do but then you can clearly see in Kenya, Uganda and Nigeria that things are moving at a very fast pace and regulators are moving likewise.

Finally, where do you think the biggest innovations will be moving forward?

David

A lot of innovation is happening right at our doorstep in the Fintech space. Payments is an ever-evolving industry. Every single day there’s a new payment method, a new way of doing things or a new market that can be exploited. Once blockchain technology has crossed over into the mainstream and people realise they can effectively move money as fast as they can send an email, that’s going to be the big breakthrough, that’s the innovation.

Nadeem

There is excitement around blockchain, digitisation of tokens and the ability to make payments instantaneously, of course. But there’s also innovation around digitised prints in terms of digital KYC and simplifying processes for consumers. I think simplification is going to be a key in terms of ensuring not only that funds are instantaneous but that the customer relationship does not simply finish at the point of collection or deposit.

Our thanks to David, Richard, Nadeem and Sidharth for their words and their time.

For more information or to speak to one of our experts please email marketing@remitone.com

R1 Webinar: The Future of Remittances

R1 Webinar: How money service businesses can maintain growth during a global pandemic

15:00 GMT, Wednesday 25 November 2020

Access the event today at 15:00 GMT here – https://zoom.us/j/97768332874

Join our next webinar where we will review recent challenges Money Service Businesses are facing, impacted by the global pandemic.

We will reveal how RemitONE clients have adapted to these new challenges and in doing so have maintained business growth and ensured compliance:

Maintaining business growth – Challenging for any business impacted by the global pandemic and with the World Bank predicting global remittances will decline by 20% in 2020, it is critical that we all take action to keep money transfers flowing.
We will share how JMMB have maintained business growth. How they have increased transaction volumes, expanded operations and scaled their business.

Ensure compliance– Regulators have become even more stringent and we are seeing growing pressure by central banks to track inbound and outbound transactions.
We will explain how Bank Asia delivers a robust and compliant platform. How they enforce KYC and AML procedures with ease, allowing them reduce costs and focus on other business goals.

Licensing – A three-fold increase in new entrants to the market, judging from the number of MSB applications being submitted to regulators in different regions.
We will reveal how Nation Transfer successfully obtained an SPI licence so they could facilitate cross border payments from the UK via digital channels.

Join our next webinar where we will discuss how we are working with clients to overcome these key challenges and take advantage of the opportunities that lie ahead!

We look forward to seeing you there.

15:00 GMT, Wednesday 25 November 2020.

Access the event today at 15:00 GMT here – https://zoom.us/j/97768332874

About RemitONE

RemitONE is a technology and business services firm that breathes innovation and excellence into the money transfer world for all types and sizes of organisations including banks, money transfer operators, micro-finance institutions, telecom firms and start-ups. Our technology allows you to manage your entire money transfer business and connect with our extensive client and partner network worldwide. Our consulting services have an impressive success rate for money service business license applications and alternative bank account solutions.

RemitONE Proud Platinum Sponsor of IMTC World 2020

We’re thrilled to be sponsoring and participating at IMTC World, 16-19 November 2020. The conference is the largest international money transfer, cross border payments and fintech event globally. This year’s online event is packed with sessions featuring the industry’s most prominent leaders, executives and pioneers.

RemitONE CMO, Aamer Abedi will be joined by, Nadeem Qureshi, CTO, USI Money; Richard Spink, Senior Business Development Manager, GBG ; Sidharth Gautam, Head of Sales, AZA and David Lambert, Commercial Director, Transact 365 for what promises to be one of the most informative panel discussions: A New Normal: Getting digital ready for post-pandemic recovery.

Participants will learn how to leverage digital technology to achieve business continuity during the pandemic, transform customer experience, ensure compliance and obtain a remittance bank account. Join the discussion in the Tropical Room at 13:00 GMT on Tuesday 17 November to take part.

Anwar H Saleem, CEO of RemitONE shared “We’re excited to meet with those looking for an opportunity to add value to their business and look forward to re-connecting with current partners. IMTC World is crafted around critical business discussions led by industry experts. We’re proud to participate in this top-tier event.”

Visit our Booth #P2 at the IMTC World, online, from 16-19 November 2020.

Join the event here – https://web.cvent.com/event/1e534a43-8f77-4b6f-af97-a69ccc023f4d/

About RemitONE