On-demand webinar | Payments and Remittances Post-Covid

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 27th of October 2021 regarding payments and remittances post-Covid.

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, watch it on-demand below.

2021 Innovation in Payments and Remittances Report

Video: Payments and Remittances Post-Covid: Taking stock of our new world

Video: Remittances in the Pandemic Age – Obstacles and Opportunities

Continuing our recent spate of discussions exploring some of the challenges being faced by the remittance sector in the wake of the COVID-19 pandemic, RemitONE hosted a webinar on the 23rd June 2021 regarding the obstacles and opportunities of remittances in the pandemic age. 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:

• Aamer Abedi, CMO, RemitONE

Panellists:

• Leon Isaacs, CEO, DMA Global
• Naved Ashraf, Head of India & South Asia, MoneyGram International
• Julie Neogy, Managing Director: Global Payments, MFS Africa

Originally the World Bank predicted that global remittances were set to decline by 20% as a direct result of the pandemic. Was last year as bad as expected across the Middle East and Africa?

Leon Isaacs: The numbers probably indicate that it wasn’t as bad as had been forecast. If we think back to this time last year, things were generally looking pretty grim for the second quarter. But actually, during the rest of the year, things really recovered in most countries. There might have been a projection of a 20% fall for last year but the actual fall ended up being only about 1.6% on a global basis – much smaller than even the most optimistic projections that were happening this time last year. I think all the individual stories behind both businesses and senders and receivers of remittances will probably show you the challenges but there’s also a great level of optimism and resilience that seems to have carried into this year.

What have been the main challenges during this period and in your point of view, are we at where you think we should be in terms of recovery?

Julie Neogy: We’re a digital payments company so we’ve actually been positively affected by COVID. In fact, our transaction values during that period doubled! I don’t really have an answer for recovery because it’s been so successful for us, but our partners certainly faced some challenges. Some of the remittance companies that we work with weren’t equipped for digital payments, for example, so they really had some hard times adjusting. I think it’s also worth mentioning the regulators were traditionally a little resistant when it came to cross border payments, but they really adjusted quickly during this time by doing things like waving transaction fees, allowing for larger limits and even encouraging interoperability in the central African region. There were challenges but I felt like besides ourselves we had a lot of our partners really thrive in that time period.

Naved Ashraf: Honestly, during April and May last year it was like doomsday and we saw an abrupt business decline because of job losses, people holding back on remittances, sending lesser amounts back home, retail locations being shut and curfews across the globe. It also led to reversed migration with people moving back home and not really knowing how long they were going to be staying for and how long the COVID situation would last. However, recovery was faster than expected. Obviously, there was governmental support, so all of this also led to people sending money back home to their loved ones or friends that needed it. And, as Julie mentioned, digital was a huge help. Moneygram is a hybrid company, and people really woke up to digital during the pandemic and started sending more money, even in countries like India, which is the largest remittance market in the world. In fact, we’ve seen triple-digit growth in the last few months.

Do you have any comments on channel cannibalisation? And do you think there is enough data out there in the market that our audience can access?

Leon Isaacs: I think the short answer is no. Obviously, the shift to digital has become very pronounced thanks to COVID but with money transfer platforms, the definition of digital often means digital only needs to be at one end of the transaction. So we should take any numbers with a pinch of salt. Also, more than half of transactions still involve cash as the key part of the transaction. Cash is still a key part of transactions even if one end is digital. I think the shift towards digital has really started, which is good. But from a data perspective, I think we’re going to need surveys that are conducted by governments or international bodies.

Some businesses have thrived during the COVID period, what do you think their differentiators have been to insulate them?

Julie Neogy: I would say it’s their agility. Agile companies have thrived. As soon as COVID hit our partnership with Moneygram skyrocketed because they were really open to changing the way that they thought and worked. For the people in the informal market that had a traditional resistance to digital payments, that barrier is now gone as digital became more of a necessity for them. I also think the companies that benefited most were the ones already in the digital space and were already on the right side of regulations, so had less groundwork to do.

What notable shifts have you seen in the remittance sector? What do you think will stick in the long term and where do you see the industry headed?

Leon Isaacs: Digital is definitely here to stay; it’s the new normal. I  think that means digital as a channel rather than just remittances. So it doesn’t just have to be remittances that are being pushed, it could be lots of other financial services. In most cases, I think it has demonstrated to people that there are alternatives that they can access that are actually quite easy to use and have many advantages that they presumed they couldn’t get before. So for instance you can now transfer money to much more remote places and the speed and the certainty is all there. But I think some of that will undoubtedly shift back after the pandemic. Historically, remittances have generally been viewed as a transactional business but I think that’s changing. One of the things we’ve really seen is that digitisation gives consumers a better understanding of the product and gives us a better understanding of the consumer. And finally, perhaps for all of us, COVID really brought the attention of policymakers and governments back to remittances. Because of this increased attention, companies are also more likely to keep their customers or attract new customers because of the improvements being suggested by the regulators. For me, that might be one of the best long term benefits.

What do you think these bigger players are doing, the established players in our industry, what steps are they taking to tap into the informal sector?

Naved Ashraf: In the south Asian market the informal sector used to be a big market  but I wouldn’t say it’s the same now. The rise of organised remittances has really taken over, and I think the biggest players are into all the nooks and corners of the countries now. The people who used to rely on somebody delivering money to them has almost completely stopped.

Julie Neogy: It’s hard to say when I’m wearing my MFS Africa hat because we are only working with regulated entities. But what I can say is that when we’re talking about mobile money usage, we look at the number of users we are sending to on both the sending side and the receiving side. And the actual amount of people we are sending to on the receiving side has increased in all of the countries that we do business in.

Aamer Abedi: For me, it’s all about interoperability. In a receiving market like India or Zimbabwe, for example, the ability for money transfer solutions and mobile network operators to work together should help bring the untapped sector into the formal fold. Because the informal sector hardly uses mobile phones. But when they realise that cash can be transferred into a mobile digital wallet in some way, and this digital wallet can be used to send money to other mobile phone users, then you are strengthening our sector and bringing new customers into the formal fold.

Leon Isaacs: Interoperability definitely has become more important as it allows non-bank financial institutions to participate in mainstream financial services. So, for instance, we’ve seen a major increase in remittance software companies being able to credit bank accounts. If you can put together what systems exist now, then you can move money across different types of services where it needs to go and allow customers to access different types of products more quickly without building something yourself from scratch.

Is the usage of digital payment vs cash/physical methods, sustainable post Covid?

Julie Neogy: I want to say yes, but in Africa, the main barrier for using digital payments has always been trust. But there are a lot of other barriers, especially in certain African countries where cash-out fees are really high and wallet sizes are really small. Countries like Kenya and Uganda made adjustments during COVID. Now if they revert to the old ways and the cash-out fees go up or if send fees are reimplemented then it’s hard to say how sustainable it is. It really depends on how the regulators in the receiving countries are responding.

Has the bank account situation improved with the drive to go digital? Or are we in the same situation, as we’ve always been?

Leon Isaacs: We thought that more digitisation would help but from what I hear, it is not making a sufficient difference. There are still lots of companies that are having real difficulties getting accounts, particularly the newer technology companies. This is not just a UK or Europe issue either, it’s happening in most parts of the world. In a way, the discussion around it has moved from a business model where there were lots of concerns around the risks associated with digital into a discussion around cryptocurrency. I think what is concerning for me is that from a government level, things were really bad in 2012 and 2013 with many companies losing their accounts. Then things hit a plateau, and because they weren’t getting any worse, attention came off. But of course, things weren’t getting any better either. For me, the problem is not really solved and it’s only going to get solved if governments are prepared to take action, and I think governments are reluctant to take action particularly. It’s actually where digitisation should help because there’s much greater transparency and control, and the ability to identify people.

Naved Ashraf:  From a South Asian perspective it is still harder for smaller players to get remittance bank accounts than it is for bigger players, but it is possible for smaller players to enter the mainstream. You just have to work a little harder than the rest.

If we have the technology, and we are proving that the technology is there, then why aren’t the governments and regulators doing more to put pressure on banks to help sustain the industry?

Leon Issacs: Ultimately, most banks want or need to deal in US dollars and to do that they need relations with big NY banks and these are the banks setting the standard. Because everybody wants to deal in US dollars at the moment, all countries are affected. This is not just an issue for money transfer platforms, but banks too, and the problem will not be resolved any time soon. There was talk about maybe remittance companies only dealing in euros rather than dollars to avoid that, but you can’t do that on a global basis.

What next then, in terms of opportunities that lie ahead for both traditional and digital MSBs post-pandemic?

Naved Ashraf: We touched upon bitcoin but bitcoins are not legal tenders yet, it’s quite popular but not legal. The central bank digital currencies are obviously blockchain-based and that is used to combat the growth of too many cryptocurrencies. But no bank as far as I know has banned the central bank digital currency. In terms of opportunities for both traditional and digital MSBs, I think blockchain that combats cryptocurrency growth could be the way forward but the biggest hurdle for blockchain adoption would be standardisation. There’s SWIFT which is like a standard that other agencies are also getting set up, and once that comes in I think it will bring in a lot of standardisation across the board. Also, we have to deal with the multiple layers of banks right now, and the lack of transparency at the moment of money. And obviously, we can’t forget about the customers, whatever apps and websites we are using right now they have to be more customer-friendly.

What does the future for the remittance business look like as we are witnessing more and more third-party open banking apps being launched?

Julie Neogy: Competition is fierce and I think what’s going to be exciting is that companies need to offer more than just a money transfer system. As more third-party apps are launched, remittance companies need to innovate with the customer’s best interests in mind in order to stay on top. Companies really need to stay at the cutting edge and come up with actual products instead of just conceptualising them.

Naved Ashraf: What I see is that there are two mediums of transfer. One is digital and one is traditional. I would say the end goal is the customer because everything has been done to make it faster, cheaper, easier and more convenient for the customer to receive their money. What will happen I think  is that both mediums will have to learn to co-exist. Cash is here to stay.

Leon Isaacs: I agree that cash isn’t going away any time soon because very few specific markets in the region can operate using only digital payments right now. Ultimately, the majority of our users live in markets where cash usage is still quite high. I guess the question is, can you make a big enough business out of digital at the current time? It is very difficult to do digital-only. You have to find the right markets  with the right remittance software and you need to have as many options as you can make work for you economically for consumers. Because at the end of the day, the consumer is going to use the service that works for them.

For more information or to request a free consultation with one of our money transfer specialists, please email marketing@remitone.com

The Future of Remittance – The trends and strategies that will shape 2021

The World Bank predicted that global remittances would decline by 20% as a direct result of the COVID-19 pandemic in 2020. It remains to be seen if there is any truth to that shocking figure but one thing is for sure – the sector suffered in 2020 and continues to do so in 2021. The question is, are we already on the road to recovery? And if not, how do we get there?

We spoke to three of our clients and partners from three different regions to gather their thoughts and gain some global insight on what lies ahead for the money transfer industry in 2021 – Hugo Cuevas-Mohr, President & CEO of Mohr World Consulting, Walter D’Cruz, CEO of Moneo Solutions and Nadeem Qureshi, CTO at USI Money. Our very own associate sales director Oussama Kseibati quizzed these thought leaders on the key strategies, the technological innovations that might start to emerge and how traditional agent-based MTOs should be reacting to them.

A year of recovery

Oussama began the discussion by reminiscing on how 2020 was a year that necessitated a wider move to digital finance for the entire financial sector: “For remittance, this meant an increase in the use of digital solutions for cross-border payments.” This included a shift to a surprising number of traditionally cash-based agents using digital means to serve clients, with around 60% of domestic and international cash transfers taking place online.

So the stage has already been set. But according to Hugo, if 2020 was a year of forced change then 2021 is going to be a year of resilience and leaning into the challenges posed by anomalies such as COVID-19 and Brexit. From where he stands, the remittance sector has already proved itself to be a resilient force. Indeed for Hugo and Mohr specifically it has been a very challenging time. Their target market is Filipinos sending money home and many Filipinos working in the UK have seen their incomes reduce or disappear completely in the last 12 months as they tend to work in medical and home care sectors.

He explains: “The era of COVID-19 is an uncertain one and that uncertainty is one of the main issues for the global remittance industry, especially when trying to predict recovery. However, despite the issues, the money transfer industry has seen a lot of recovery and migrant communities are continuing to send money to their families, regardless of changes in their own employment situation.”

Nadeem agrees and asserts that: “Despite the decline last year, the money transfer industry is a resilient one and is a sector which will certainly improve a lot faster than many others.” They also both agree that while they feel recovery is indeed already on the cards, we’ll need to wait until we see the data before we draw any solid conclusions.

Strategies for success

Of course, while the sector might be incredibly resilient, it is also far from bulletproof. This means there are going to need to be some solid strategies to help traditional agents-based actors adapt to the digital push of 2020. The primary trend from which all other trends seem to emerge is a mass migration into the digital realm. This will be particularly relevant for small-medium MTOs, as they will have the flexibility to push further into digital solutions as the industry continues its recovery.

For Nadeem, however, he feels it’s the medium-large institutions that will be leading the way. He explains: “Many of these larger MSBs will be down-streaming activities, hoping for increased access to expanding pay-out networks and other digital solutions, such as e-wallets. As the industry recovers and the needs of larger business begin to grow again, the MSBs will also be looking for new ways to grow too, and this will heavily centre on the digital push.”

Oussama then turns the focus onto blockchain and cryptocurrency, stating: “As a direct result of the pandemic some currencies are going to be more volatile and people could seek safe havens in cryptocurrency, which is something many banks are already doing.”

Walter agrees on this increase in blockchain adoption, which is being fuelled by the mainstream capital markets. He adds: “The popularity and interest surrounding blockchain has been growing for several years now but in 2020 we had begun to see it really explode. As well as the obvious focus on cryptocurrency such as bitcoin, blockchain is also being used by enterprise governments and financial institutions to assist with seamlessly managing the exchange of value.” 

Hugo, meanwhile, believes that there will be increased pressure on MTOs for transparency when it comes to fees and FX rates and that blockchain will definitely help with this. And with major names such as JP Morgan already throwing their hats into the ring, blockchain could very well end up being the major player that catalyses recovery as we move deeper into 2021. He also feels that we’ll be seeing more companies working internally to lower costs and more partnerships and integrations by year’s end.

Derisking and the challenger bank solution

According to Hugo, 2020 was the year of the digital tsunami and 2021 is going to be the year of the blockchain and cryptocurrency tsunami and he feels this is going to have a major impact on derisking, which is worse in some countries than in others but is still a global problem. He does also believe, however, that challenger banks might be the solution as long as they are properly integrated with fintech.

He says: “The position of banks as integrators of other services might be making it easier for other banks. This industry has to rely on these partnerships between the new banks and the fintechs and allow them to create solutions together. COVID has certainly pushed that forward, which I guess you could say is something of a silver lining.”

Above all, however, he believes that it’s creativity that is pushing the industry forward and he is inspired by all of the new players doing the groundwork in that regard. Indeed, he feels that’s where the potential for blockchain comes in. 

Oussama asks whether there are “solutions out there with companies acting as an aggregator to open up space as a quicker route to market for smaller MTOs and whether or not the big banks will change their attitude towards MTOs accordingly.” He adds: “With HSBC being fined £1.2 billion as a result of derisking recently, it’s unlikely the larger banks are going to shift their viewpoint but challenger banks are coming through to fill that space.”

According to Walter: “The reason they won’t support MTOs is that you’re not only essentially taking their business away by cutting into a piece of their pie but in their eyes, the risk involved is greater than the value that MTO might bring to the table and that’s all down to the fact there’s a lack of transparency between the bank’s compliance and the MTO.”

For Nadeem, meanwhile, he can see major bank attitudes towards derisking getting worse as the cost and the risk in terms of the fines is just too great compared to the benefits. However, he believes the challenger banks might offer a solution here. He explains: “The challenger banks entering the market are not necessarily going to solve the problem but the smaller MTOs looking for partners are going to have a much better chance at finding partnerships with these challengers than their larger counterparts.”

Then, of course, there is the impact of Brexit to unpack and digest. Generally speaking, our talking heads concluded that there is no need for MTOs to panic as long as they can learn to adapt. There are certainly going to be losses for any MTO based in the UK or Europe that deals with those markets, but London will remain a major financial centre and the centre must hold. For more on their thoughts, you can read our full piece on what Brexit means for the remittance sector – https://www.remitone.com/brexit-is-a-done-deal-but-what-does-that-mean-for-the-remittance-sector/

Will 2021 be the year of innovation or survival?

Walter feels 2021 is going to be more about simply “getting through it” than anything else, but that doesn’t mean he’s without hope. He explains: “I don’t necessarily think this year will initially be about the deployment of new technology. A lot of businesses are still recovering from the fallout of the pandemic so they don’t necessarily have the resources available to do a complete revamp.”

The improvements, he feels will be in an “explosion of partnerships,” because fintechs don’t have the resources to do everything alone, whether that’s compliance, risk or customer service. So they will need the help of both larger partners and the ‘little guys’, such as MTOs. He continues: “More connections and lower costs are going to be the case, broadly speaking for 2021 and it’s concepts like the RemitONE ecosystem that are going to help add value across the whole chain.”

Hugo agrees that 2021 is going to be a year of partnerships and collaboration and a shift in mentality across the board. He argues that MSBs should “forget about doing everything themselves. Everything will be almost modular because, particularly for the smaller companies, somebody else will be able to do one specific thing better and cheaper than you can.” Right now it would appear that we’re living in a world of APIs and developments that are great for small companies which can lower their costs and gain access to these solutions, whether that’s blockchain or something we haven’t even seen yet.

Nadeem, meanwhile, speaks of an e-digital compliance evolution: “When you have a sector with a large amount of competition it’s always going to be about who can provide the best user journey. Digital footprints are starting to grow and Fintechs are challenging regulators and pushing them to improve things, whether that’s through something as advanced as iris scanning technology or as simple as syncing their platform with social media to onboard customers more efficiently.” 

As Oussama sums up: “It’s going to be a year of smaller MTOs challenging the way things are being executed from a more modular approach through blockchain or other methods and we will continue to see this evolution going into 2022 and beyond.”

A beacon of hope

Throughout the talk, our experts also touched on several other more specific topics regarding the regulatory uncertainties in the Nigerian market to the general emerging markets in the African continent and the cost of acquiring new customers. To see the whole discussion for yourself, you can do so right here.

But the session ended on a resolutely positive note. Our experts spoke of advice for start-up money remittance businesses with no prior experience of the business and suggested that it was still a sector ripe with potential as long as these aspirant start-ups were willing to learn, read, research and understand the market. 

They also reiterated what appeared to be the crux of the discussion – that all the different strands of the financial sector need to start working together and forging deeper connections if they hope to succeed and thrive in 2021. That will lead to greater transparency, lower costs and more innovation and RemitONE’s deep ecosystem and malleable compliance network is the perfect middleman to help build and maintain those connections.

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

Video: Remittances from the Gulf – The Impact of Covid-19 and Trends for 2021

During IMTC World 2020, RemitONE’s CMO, Aamer Abedi, moderated an engaging panel discussion on Remittances from the Gulf – The Impact of COVID and trends for 2021. During the panel he asked industry experts from the UAE, Saudi Arabia and Pakistan; how the market has been impacted; has COVID accelerated a digital transformation; and what’s the landscape for competition in your region.

Watch the full discussion here or read the highlights below:

How has your region been affected?

Osama Al Rahma, Advisor at Al Fardan Exchange and Vice Chairman of the Foreign Exchange & Remittance Group in UAE, commented that in the UAE there has been an unprecedented lockdown and control of the mobility of people has been restricted. He adds that it is unique that the workforce in the UAE is 90% ex-pats from over 200 nationalities and all are under the wage protection system. In terms of remittances, the service continued during the lockdown, the government recognised receiving countries are in severe need for the service and it’s thanks to authorities that permission could continue. 

Khalid Al Zain, Head of Business Development at Bank Albilad in Saudi Arabia, commented that the Saudi Arabian Government has been investing in the private sector to keep their staff employed. He adds, there have been measures from the regulators including social distancing. Khalid notices that there is an impact but it’s not too much. Due to the support from the government and measures taken, such as social distancing, hygiene and increased security. He adds that despite COVID the number of employees is increasing and the workforce is in a good shape in Saudi Arabia. 

How has the market been impacted?

Faisal Rashid is Head of Financial Institutions, International Banking & Home Remittance Business at Bank Alfalah in Pakistan, he explains that as Pakistan is predominantly a receiving country you would expect the country to be impacted significantly by COVID. However, he has found that from the GCC, where Pakistan receives its bulk of transactions, remittances have grown by 25%. He adds this is driven primarily by a 66% increase from Saudi Arabia and a 17% increase from the UAE. He believes this increase is due to the strength of partners in those regions moving from agent to digital channels. He also mentions that the receiving side in Pakistan has struggled to convert to digital pay-out due to the lack of infrastructure and the digital ecosystem.

Osama explains that in the UAE there have been declines in remittances, Egypt by 8%, India by 17% and the Philippines by 24%. However, they have seen growth in Pakistan by 11.5%. He believes this increase is due to transactions going through unofficial channels now moving to official channels. It could be argued that this is one of the positives coming out of the pandemic.

Khalid adds in Saudi Arabia they saw a decline in remittances during the initial phase of the pandemic, however, this has since changed and overall, they have witnessed growth in remittance by 8%. He also explains that customers are moving to digital channels rather than using traditional methods. 

Has COVID accelerated a digital transformation?

Faisal comments that Pakistan is a young population who understands modern digital communication tools, however, only one-third of the total population is using smartphones causing a barrier to moving online. He adds that basic smartphones are now becoming available which is what Pakistan needs to create an ecosystem to make it easier to move money around. The graduation of moving to digital channels has started, all banks are working on their digital offering and we will see a large shift in the coming years with COVID hastening the transformation. 

Osama agrees that COVID has accelerated the digital transformation of remittances in the UAE, but mentions that the Government of the UAE created a strategic initiative for digital transformation before COVID, which included strategy around infrastructure, policies, regulation and cybersecurity. This initiative includes the ‘UAE Pass’ which provides UAE citizens with full digital identity. These initiatives coupled with 80% of the population using smartphones, have provided the UAE with a seamless transition to moving online. Osama notices that the technology, infrastructure, and cybersecurity are all available in the country, which enhances the customers’ experience on the digital level.

Khalid has found that the migration of customers to digital is going excellently in Saudi Arabia and he notices a spike in migration of customers to digital. He explains that all citizens in Saudi Arabia are required to provide a fingerprint for their ID card and data has been stored in the mainframe. The private and government sectors can liberate from this data which has allowed Khalid and his team to introduce E-KYC seamlessly. Khalid notices that lots of customers are moving from traditional methods to digital. 

What’s the landscape for competition in your region? 

Khaled comments that Saudi Arabia wants to be a cashless society by 2030. He adds there are lots of strategies and initiatives in place, organised by the Saudi Arabian regulators, to open the market and invite many players to come. He believes that by increasing competition in the market, services will improve and it’s not just about one bank, there are lots of players in the market.

Similarly, Osama explains, in the UAE we have regulatory bodies such as Abu Dhabi Global Markets (ADGM) they have their regulations and initiatives for start-ups to support, facilitate and encourage fintech companies. The UAE also have Hub 71, which is a body to support start-ups, that have a payment lab to support innovation and testing. He adds, In Dubai, we have the Fintech Hive and the Dubai Economic Develop Department, where Pay Engage is the latest initiative. He explains that initiatives are being set up to allow for more innovation and similarly to Saudi Arabia, to move towards a cashless society. He concludes, there are strategies and clear milestones in place, with all stakeholders involved including federal and local government. There is a shift and it’s happening very quickly which is encouraging many companies to move their businesses to the UAE because they can benefit from the infrastructure. 

Conclusion – COVID-19: An agent of change

The pervasive atmosphere in the sector appears to be one of defiant optimism in the face of some pretty sobering stats. The vast majority of the challenges posed by the pandemic, however, are either short-term by nature or have, in some of the cases outlined above, already been overcome.

Remittance will always represent a lifeline for developing countries and as technology adoption continues to penetrate every part of the globe, digital transformation is something that can’t be ignored any longer. Nobody is going to remember coronavirus as a ‘good thing’ but it could at least be recognised as an agent of change and change is often necessary, even if it feels a little intimidating at the time.

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

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.

Follow us on Twitter (@RemitONE) and LinkedIn (RemitONE) for the latest industry updates.

COVID-19 update from RemitONE

Dear All,

We wanted to let you know that we at RemitONE are committed and well-prepared to keeping your remittance services running smoothly – the way you’re used to.

Our strategy is now designed to mitigate the risks that accompany the COVID-19 pandemic.
Our strategy ensures the following:

• Our employees are safe
• All services continue running as normal

Our Employees are Safe

Our first commitment is to the health and safety of our staff. We can confirm that all staff are healthy and ready to help and support our customers. We have been implementing remote working for over 3 years now, and therefore already offer flexible working locations and hours to help our staff. Since Thu 12 March 2020 we have limited travel for all employees, closed our offices and moved to phone and video calls for meetings.

All Services Continue Running as Normal

We have increased our infrastructure capacities to ensure our services continue to run with no downtime or hiccups. With the strong foundations and structures that support remote work, we are confident that the COVID-19 outbreak will not impact our ability to continue to provide our services as you’d expect. If you have any concerns though, please reach out to our support team using the usual channels.

What’s Next?

We will continue to closely monitor the evolving situation with COVID-19 and will follow the guidance of the health and government authorities in the cities and regions where we operate. Our priority remains the safety of our colleagues, customers and partners.

Should you have any questions or concerns, please don’t hesitate to contact our team on info@remitone.com 

FAQ’s

1. How will Covid-19 affect the operations of RemitONE in all regions?
   We will continue to trade as normal and will be fully operational during this time and have put in place a robust remote working policy to ensure we are fully operational.
2. Will we still be able to process transactions as normal?
   Yes, we will ensure there will be no disruption on our systems, however certain pay-out partners or add-on service providers may have their own policy. You would need to check directly with them.
3. Will we still receive support and help from RemitONE?
   Yes, our sales, support and billing teams are fully operational and equipped to deal with your needs and issues, and our hours of business will remain unchanged. Please continue to reach out to us using the usual channels.
4. How long are RemitONE staff likely to be working remotely?
   We do not know at present but will continue to follow the up-to-date guidance provided by the relevant authorities.

Sincerely,
The RemitONE Team