Building Operational Resilience in a Digital Industry: Security, KYC and Compliance

Operational resilience has become a critical concept for businesses in the digital age, where disruptions can occur at any moment, and the impact can be significant. To ensure operations are delivered through disruption, organisations need to be prepared, adaptable, and ready to respond to any unforeseen events whilst staying compliant and secure, but how? We gathered our experts to discuss exactly that.  

Moderator: 

• Oussama Kseibati, Associate Sales Director, RemitONE 

Our panellists include: 

• Kathy Tomasofsky, Executive Director, MSBA  
• Richard Spink, Sales Director – Channels & Partnerships, GBG  
• Ibrahim Muhammad, Payments Consultant, Finxplor 
• Nadeem Qureshi, CTO, USI Money 

What is Operational Intelligence? 

Before we dive into the key pillars, let’s first define operational intelligence.  

Operational intelligence refers to an organisation’s ability to adapt and adjust operations during disruptions, ensuring they are well-prepared for unexpected situations. It differs from disaster recovery and business continuity plans, as it focuses on proactive measures for operational optimisation rather than reactive responses to disruptions. 

What are the key pillars of operational resilience?  

Based on the inputs from Nadeem and Ibrahim, the key pillars of operational resilience are as follows: 

1. Prevention: Proactive measures taken to prevent or minimise the impact of disruptions or shocks to business operations. 

2. Preparation: Having proper measures in place to respond to any unforeseen events, including identification of critical business services, and ensuring they cause the least disruption to the ecosystem. 

3. Robustness: Measures taken to minimise the risks and interruptions caused by the occurrence, and to ensure continuity of operations. 

4. Recovery: Ability to recover effectively and efficiently. 

5. Adaptation: The ability to adapt to changes in the environment and to be resilient in the face of challenges and uncertainty. 

6. Learning: Continuous learning and improvement from past experiences. 

To sum this up, having a complete framework in place to protect consumers, ensures market integrity, and safeguards vulnerable customers, which is key for operational resilience. 

Why is it important to have operational resilience?  

Operational resilience has always been important, especially in recent years, where the recent pandemic has brought it into sharp focus. It forced organisations to adapt quickly and left a lasting impact on the business world. Some changes include the organisation’s employees working from home and amending their supply chain processes. 

This also meant regulatory bodies like the Financial Conduct Authority (FCA) had to be more vigilant and ensure that firms are capable and ready to handle such unplanned situations. Similarly, companies themselves have a responsibility to have measures in place to ensure that they are prepared for anything that comes their way. 

So, what are some of these measures? Employee safety is a top priority, as well as ensuring that all people processes are up-to-date and robust. Companies should aim to have agile systems in place to enable them to pivot quickly when needed, and investing in up-to-date technology is a smart move to ensure you’re able to operate seamlessly even in the face of disruption. 

Kathy pointed out that some American companies do not pay attention to small details such as training staff on email scams and viruses. Therefore, establishing new procedures is vital to continually evolve the businesses safely. This also builds good business practices and saves time and effort in the long run, as you’ll already have procedures in place to deal with unexpected interruptions. Being prepared also helps identify potential risks and plan accordingly, minimising damage when things go wrong. 

But the benefits go beyond just risk reduction. By ensuring that every department within your organisation is on board, you’re creating a culture of readiness and adaptability that can help your business thrive in the ever-changing landscape.  

What challenges do firms face in developing the required framework for operational resilience?  

One main challenge Nadeem addresses is the struggle many organisations face when trying to grasp the meaning of operational resilience – they often view it as another part of their continuity or disaster recovery plans when it is, in fact, a distinct and complementary approach. 

Another common misconception is that companies need to create a whole new department and invest a considerable number of resources, time, and money into operational resilience. In reality, it’s more about building on existing policies and improving them in stages over time. It involves identifying gaps, assessing risks, and continuously evolving and adapting to new challenges. Companies also fail to reassess if the technology they have access to or are currently working on is both robust and future-proof. 

Ibrahim also identified post-pandemic issues that businesses are still dealing with, such as developing the required framework for operational resilience in the post-pandemic scenario. These include sudden shifts in how business is conducted, which can lead to losing key resources, an inability to serve customers through offices, and financial constraints. Additionally, there are regulatory requirements that need to be addressed, adding further operational burden to businesses. 

What is digital ID? Why is digital ID necessary? How does it impact KYC and AML? 

Digital ID is verifying one’s identity, confirming they are who they claim to be. Know Your Customer (KYC) is a process that does not require physical confirmation of the customer’s identity. Instead, it confirms that the details provided by the customer appear to be legitimate and consistent with the service they are trying to access. 

Anti Money Laundering checks (AML) go a step further than KYC and involve compliance with regulations. AML checks look for any potential association with financial crimes or politically exposed individuals.  

There is a growing interest in digital identity programs, leading to their implementation in countries such as Estonia, Sweden, and some African nations. However, digital identity as a topic is tied up with politics, making it a complex issue. In countries where digital identity is in use, it has been largely successful; on the other hand, many countries have not been as successful due to a lack of political will. Despite this, the demand for digital identity is increasing, and it is likely that we will see more implementation and integration of it in the future. 

Richard predicts that the future of online identity verification will revolutionise the way we sign up for services. By linking AML compliance tokens to an individual’s digital ID, personal information such as age and address will be securely stored in a vault, allowing only the necessary information to be shared. This will streamline the process of accessing services whilst maintaining security and privacy. 

Kathy acknowledges that the adoption of digital ID systems in the US may face political opposition due to concerns over data ownership and privacy. Despite this, there is recognition that such systems are necessary for effective AML programs, as digital money is becoming more common. Therefore, finding a way to implement digital ID systems while addressing data ownership and privacy concerns is crucial for maintaining operational resilience in the financial sector. A collaborative engagement between significant people from diverse departments can channel various viewpoints. 

How can we simplify KYC identity verification (IDV) checks for key players?

The KYC IDV checks for key players could be simplified through digital verification, but regulation varies across the world, leading to a fragmented system. For instance, the UAE uses facial recognition tied to government ID, while Spain and Italy do video-capturing conversations, however, this may not be as scalable as they’re reliant on call centres. While in the UK, US, and Australia, the process is more data-driven, causing less friction for consumers. To address these challenges, governments and tech companies should exchange data, but the lack of trust often prevents the two parties from forging together, making them hesitant to collaborate. 

Moreover, the use of innovative technologies such as social media biometrics, semantic analysis, and APIs for open banking can help cut down the process. Reviewing current procedures and incorporating relevant touchpoints and online portals can also streamline the process, making it more agile. The slow implementation of digital IDV must also be addressed to meet customer expectations set by fintech innovation. The UAE pass app is an example of the successful simplification of KYC, allowing users to verify their IDs and sign and share documents digitally in a secure manner. 

What are the main challenges facing Money Transfer Operators (MTOs) regarding compliance and regulation? 

Some of the main challenges according to Nadeem include insufficient time spent investigating constant shifts, lack of periodic policy reviews, and the need for third-party audits to provide external viewpoints for improvement frameworks. These challenges highlight the importance of staying on top of regulatory changes and maintaining compliance. 

Richard also adds that businesses demand a global solution that works everywhere, which is challenging due to different regulations in each country, as highlighted previously. ID documentation and databases also vary in the information provided, making it difficult to create a universal solution that delivers transparency and granularity. 

Does the challenge of varying regulations over multiple jurisdictions impede or enable innovation? 

The existence of various regulations across multiple jurisdictions enables more innovation. Although the technology exists, the problem lies in finding organisations that can be trusted to deliver such solutions. In fact, many innovations arise from people facing daily challenges and finding new solutions. In today’s constantly evolving regulatory landscape, it’s important for businesses to accept it as the new norm and raise their standards to gain a competitive edge. One successful example of this is open banking in the UK, which was made possible by regulatory changes and has opened opportunities for innovative financial products and services. 

In summary, having operational resilience is crucial for businesses to not only survive but thrive in today’s fast-paced digital environment. By being prepared, adaptable, and ready to respond to any unexpected events, businesses can reduce risk, save time and money, and ensure their operations continue smoothly.

What next? 

At RemitONE, we endeavour to provide the most compliant technology and licensing solutions, alongside expert advice on how to remain compliant when starting or scaling your business.  

RemitONE’s Compliance Manager™ has been evaluated by leading regulators and used by top-tier banks and MTOs. Our NameMatch™ application checks remitter names against international AML block-lists including CIA World Leaders, DFAT Canada, DFAT Australia, EU Sanctions, FIU Netherlands, HM Treasury, MAS, SECO, UN 1267, MAS and much more. We link up with a variety of PEPs and Sanctions lists worldwide. 

For AML and Compliance support, or to hear more about how the RemitONE solutions can support your business, get in touch at sales@remitone.com 

Video: Saving the Crucial Role of Agents and Banks in the Remittance Industry

Brought to you by RemitONE, the Innovation in Payments and Remittances (IPR) Global Hybrid event took place on 19-20 October 2022 and included a series of fantastic discussions.

Wallets have been on the rise in recent years which has forced banks to embrace technological advancements to keep up with the pace of digital innovations in the remittance industry. In this panel, we uncover the driving forces behind this change and the possible impact it may have on banks, agents, and the overall money transfer landscape in the coming years.

Moderator:

• Ababacar Seck, Managing Director – Africa, RemitONE

Our panellists include:

• Sharon Gibson, CEO, JMMB Money Transfer
• Leon Isaacs, Founder and CEO, DMA Global
• George Boateng, COO, Unity Link

Why are pay-out transactions shifting to wallets? 

There’s been an increase in the popularity of pay-out transactions through wallets, due to their accessibility and simplicity. This upward trend is particularly prominent in Asia and Africa. For example, in Ghana, the mobile money market reached $121.8 Billion in 2022 and is expected to grow to $590.7 Billion by 2028. George believes the reason behind this is attributed to factors such as convenience, as wallets are more easily within reach than banks, and overall save time and effort.

Leon also reinforces, wallets are often preferable as they’re easy to use which means people don’t require additional assistance. Other drivers are, the senders have more options, people have become more digitally savvy and most notably, it’s cheaper. Another key benefit of wallets is their increased security due to tokenization, which is a unique identification number attached to any personal information such as account numbers.

However, it’s not the same in every region. Sharon shares that in Jamaica there’s only one institute that offers mobile wallets, but that could change very soon. The recent launch of CBDC can possibly encourage more institutions to embrace digital wallets.

How can banks and traditional agents cope in the digital era?

Leon states in many cases it’s rare for agents or banks to be solely a remittance business. While they may have their core purpose, they should adapt and diversify their services to progress ahead in the competitive market. Sharon suggests that banks can collaborate with more agents to offer their products and services and satisfy client needs, however, there need to be adequate technology capabilities in place for it to be a success.

Data shows that customers prefer the physical contact of agents as they instil trust and provide clear guidance when a problem occurs, as opposed to communicating with a bot. A study even found that 64% of customers commented that they could not solve a problem when using mobile apps to transfer money. Overall, agents play a crucial role in building customer trust and loyalty especially as a large proportion of transactions are still carried out in stores and not through digital means, which proves they still hold a strong position.

There are different considerations for the send and receiving end for agents. The pandemic did accelerate a surge in people adopting digital payments and transactions which resulted in a lesser need for people to visit agents, and it’s likely that this will continue. As for the pay-out side, there is potential for agents to educate customers as online accessibility varies in countries where people are still hesitant about online banking and money transfers – this creates a good chance for agents to bridge the gap by acting as the intermediaries between clients and digital payments. Customers already trust these agents, which makes it more probable for them to adopt changes with the agents’ help.

Leveraging technology is another technique agents can utilise to enhance efficiency and strengthen their role further. For instance, many people have formed personal relationships with agents but sometimes lack financial literacy. In such cases, agents can take advantage of innovations such as card readers to increase customer security and reinforce the trust clients have in them. This can solidify the bond between the agent and client as well.

MNOs are taking over transactions led by banks, is this healthy? What does this mean for the future of final inclusion?

There is no denying that competition drives innovation and MNOs gaining the lead has pressured banks to also step up their game to progress ahead. MNOs often educate the underbanked on how to use their products, an area where banks are lacking. There’s also greater flexibility with MNOs, as people can instantly access their digital funds from the comfort of their homes without the need for documentation and physical visits to the bank, helping them to save precious time.

MNOs particularly boast a good distribution of agents across both send and pay-out. However, their products excel in locations where there is a vast digital presence (although they still have a huge potential to increase penetration of financial services, which will continue to encourage financial inclusion). In locations where there is good digital infrastructure, the need for agents to pay out cash is also lessened, this creates a window of opportunity for them to diversify their products and services. One example is M-pesa in Africa, where digital wallets are the primary method of payment. As a result, customers rarely use physical cash, which suggests that people will only need to visit a branch for a specific need unrelated to money transfers or cash-outs.

The changing face of remittance clients requires a new approach, how can MTOs keep on top of the needs of clients and how will this affect the business model?

In contrast to the past, migrants are more skilled individuals and therefore less reliant on agents, demonstrating increased digital literacy. As a result, the power balance has shifted to the customers, with the internet providing easy access for them to quickly switch to other companies if they are unsatisfied with the service.

Clients also tend to focus more on convenience, such as banking being available everywhere at any time and more demand for receiving immediate results. This places a heavy burden on banks – they often have to increase their costs to expand their workforce and enhance their operations more robustly. However, with the increasing popularity of social media, email, live chat and phone, it becomes challenging for the banks to meet the demand – this can lead to dissatisfaction, complaints and negative reviews, overall damaging the brand’s reputation.

To minimise this problem, Sharon proposes a collaborative relationship between banks and agents, to exchange knowledge and expertise and gain a thorough understanding of the client’s needs. Leon explains that companies need to rethink their strategies to maintain a close connection with clients whilst keeping pace with their changing needs. However, a positive takeaway is that customers are benefiting from having their needs finally met and the industry continues to thrive.

Can technology help agents preserve their role?

Whilst technology can be costly, it can be a useful tool to streamline operations more effectively. One way is gathering accurate data in a more interactive way instead of relying on traditional surveys. Social media platforms like Twitter polls can help analyse consumer behaviour, identifying factors which motivate them to pick specific agents over others.

As the rapid surge of digitalisation continues, more businesses are having to adapt. At RemitONE, we play a pivotal role in helping banks shift to the online realm. Our software empowers agents to provide customers with user-friendly portals whilst providing an array of options for them to choose from, such as airtime top-ups, prepaid card services and more. By utilising our industry-leading software, you can increase your transaction rates whilst maintaining top-notch security through our AML and KYC checks. This results in a seamless process from send to pay-out. You can also gain access to our global network of clients and partners that we have built over decades for you to access right away, saving you time, cost and headache. 

Interested in powering up your business? Get in touch with our experts to provide your customers with a secure, convenient, and exceptional money-transfer experience.

Tap into our experts and schedule a free consultation.

References

https://www.imarcgroup.com/ghana-mobile-money-market

https://www.westernunion.com/blog/en/leery-of-how-digital-wallets-work-let-us-break-it-down-for-you/

https://thefinancialbrand.com/news/digital-banking/mobile-banking-trends/what-consumers-actually-want-from-their-banks-mobile-app-120754/

Innovation in Payments and Remittances (IPR) Global 2022 – Brought to you by RemitONE

RemitONE was pleased to bring to our great industry the Innovation in Payments and Remittances (IPR) Global event at The Westin Hotel, London, UK, that took place from Wednesday 19 to Thursday 20 October 2022.

IPR Global is the ultimate hybrid event for those passionate about transforming the money transfer industry. The event brings together global industry stakeholders, visionaries and business leaders to make informed decisions and drive positive change in the industry. 

The IPR Global event featured 30 prominent industry speakers, including leading experts from Al Fardan Exchange, JMMB Money Transfer, Moneygram, RemitONE and many others from the money transfer supply chain.

Over 1000 online and 100 in-person attendees took part in the expert panel sessions, training courses and networking breaks at The Westin Hotel and on the dedicated online platform.

Watch all the panel sessions on-demand here.

The Growing Money Transfer Industry: Unlocking new revenue streams and seizing opportunities

Partnerships and Interoperability in the Payments Ecosystem

Mobile Money and the Utilisation of Super Apps

IPR Course: RegTech for Compliance in the Money Transfer Industry

Building Operational Resilience in a Digital Industry: Security, KYC and Compliance

Saving the Crucial Role of Agents and Banks in the Remittance Industry

Does Blockchain have a Future in Payments and Remittances?

IPR Course: The Ultimate Guide for Start-Ups

What next?

To discuss any of the panel sessions or to get more information on how RemitONE can support your Money Service Business, get in touch with the team at sales@remitone.com

Q&A with Industry Experts: Ibrahim Muhammad

Watch the latest videos in our ‘Q&A with Industry Experts’ series, featuring Ibrahim Muhammad, Payments Consultant at Finxplor.

In our interview, Ibrahim reviews the compliance and regulation requirements companies need in order to start, maintain and grow a Money Service Business (MSB).

What next?

Now that you’ve watched our video we want to help you get the most out of it and plan for the rest of 2022.

Tap into our experts and schedule a free consultation.

Video: Mobile Payments and Remittances – Understanding the impact and the opportunities

Continuing our recent discussions exploring the evolution of the remittance sector, RemitONE hosted their IPR EMEA event on 2-3 March 2022. The 90-minute panel session centred around the evolution of mobile payments and remittances and how they are going to impact the industry.

The panel consisted of experts from both RemitONE and our friends and partners in other global companies. In case you missed the discussion, here is a summary of the key insights.

Webinar moderator:

• Ababacar Seck, Managing Director of Africa, RemitONE

Panellists:

• Sukhi Srivatsan, Head of Sales, AZA Finance
• Edward Chidavarume, General Manager of Business Development, CashPesa
• Muhammad M. Jagana, CEO, Kuringo
• Clinton Leask, Business Development Lead, Pay@

Time Stamps

00:00 Introductions

06:32 Why does financial inclusion matter?

11:15 Who delivers financial services in the market at the moment?

14:35 What obstacles and legal infrastructure regulations are agents, MTOs and banks facing to catch up with mobile operators in Africa?

24:32 What roles do technology and mobile payments play in financial inclusion? What are the main challenges?

35:02 How will interoperability between Telcos benefit the end users?

42:22 What role do central banks and governments play in financial inclusion?

47:12 How can we improve the user experience and make it seamless for the unbanked population in Africa?

53:54 What progress should we expect to see in the years to come? What advancements need to happen?

Why does financial inclusion matter? 

Sukhi: Financial inclusion matters today because it is our greater responsibility to ensure everyone has equal opportunity, whether you are a business or an individual, to access affordable and timely financial services and products. Especially if you look at the world of mobile payments and remittances. We need to empower communities, give them access to basic needs, like food and shelter, but also increase the economic output of the country and level the playing field between developed in frontier markets.

Muhammad: Financial inclusion is one of the fastest ways to change lives, by empowering the unbanked or the underbanked; especially women and young entrepreneurs who find it very challenging sometimes to have access to financial bank accounts. I think digitalisation of the financial system makes it much easier for people, especially in Africa. As we all know today, mobile phone penetration is huge in Africa, and the majority of people know how to use things like WhatsApp, so it makes it easier for them to use their phone and to be included in the financial system.

Who delivers financial services in the market at the moment?

Muhammad: Today, companies like Kuringo and other fintechs are expanding their reach to the unbanked and providing financial inclusion services, simply by offering them an app – they do not need to have a complicated banking system or anything else for them to be able to access the payment systems. But generally, it’s the fintech companies and mobile money operators that are disrupting this market.

Sukhi: I think one important point to highlight here is a provider like RemitONE is looking to bring everything together and do a one-to-many integration. So, through the RemitONE platform, an MTO could connect and push all the remittances with one integration, but in many markets. So, there are fintechs that are really growing in each of these separate markets, but the hardship and the obstacles in each market are so unique. So, I think providers like RemitONE really look at that aspect.

What obstacles and legal infrastructure regulations are agents, MTOs and banks facing to catch up with mobile operators in Africa?

Clinton: I think the biggest challenge is that it’s always difficult for underserved incumbents. So, whether it is mobile apps and mobile operators in Central Africa, or whether it is tier one banks, like we have in South Africa, changing things without regulation or unforeseen market changes is very difficult to do. The way compliance is shaping up these days, those burdens are growing. It is getting more onerous to comply with various things around AML, CFT, FATF, particularly for onboarding and monitoring end customers, especially as new entrants and smaller players catch up – you must comply with these from the get-go.

Muhammad: These are the challenges that can create obstacles because only the big guys are there already. They have a bigger balance sheet and a bigger team. But the good thing is, especially in Africa, there is a lot of ‘plug and play’ technology coming in. If you look at it in terms of, how do I partner with somebody who specializes in providing a platform, who specializes in providing tech, who specializes in something else, and you focus on the user experience, it will help you grow your footprint.

Edward: We’ve also seen the regulator shift into a more risk-based approach when it comes to KYC on customers, which now gives the fintech players the opportunity to come up with solutions that enable them to onboard customers easily with a risk-based approach. You can have API integrations for verifying documents that you get from the customers digitally which makes onboarding easier and cheaper.

What roles do technology and mobile payments play in financial inclusion? What are the main challenges?

Edward: We are now shifting from the brick-and-mortar. The brick-and-mortar banks were the ones dominating the financial services market. But now we’re looking at the mobile app and the way that it’s increasing in Africa – by 2025 it has been expected that at least 80% of the population in Africa will have mobile phones. So, now with the technology and the mobile penetration building within Sub-Saharan Africa, it becomes easier with technology for us to offer financial solutions to these markets where you can offer mobile money solutions.

Clinton: Mobile payments are the future. There is no other way to do this and to solve what needs to be done in Africa in terms of financial inclusion. The devices aren’t a problem anymore, unlike a few years ago. It is really about ensuring that the cost of data is being tackled effectively by regulators across all countries to promote the usage of mobile payments.

Sukhi: One example is if a fintech is starting out and wants to build a mobile app. Initially, there needs to be a focus on building one thing and doing it well and gaining user attraction. And then once that is underway, and you have that retention of users, it is important to start to diversify the products and services you offer. So, not just being able to receive money, and me being able to send it to you in a P2P manner, but also, can I do other things with this wallet? Can I go and can I buy a coffee? Can I go to the merchant? And can I pay for my scarf? So, lots of different things, lots of different use cases. But, the initial steps are to start small, build focus, and then eventually build up and add more products and services. So, you can diversify and create an entire user experience within your product and within your service.

How will interoperability between Telcos benefit the end users?

Muhammad: Today, if you do not have interoperability, a certain segment of society or a certain community will be left out. The cost of doing business or the cost of providing the last mile of the financial inclusion journey to them is expensive. So, to reduce the cost of transactions, interoperability is a must. Lowering costs of transactions, increasing volumes and expanding footprints can lead to people being able to pay for basic things in life that they need. It allows farmers to sell their produce, and they don’t have to travel miles to a bank to cash their cooperative checks. I think the interoperability we’ve seen in the UK, with the open banking system, has really allowed fintechs to explode, much more than any other European or US system. So, it is essential in Africa for governments to look at interoperability as a key to open access to finance, allowing the underbanked to have access to financial inclusion, and allowing the unbanked to come on board.

Edward: It is such a key thing for end consumers. We’ve seen it in South Africa, for the mobile operators it has created a boom in terms of customers because people are now able to upgrade and do things much easier. So, there is a strong benefit for interoperability, not only for the consumers but for the Telcos as well. They will see a rise in transactions for sure.

Sukhi: So, there is a lot of hesitation when it comes to this from many of the Telcos or the bigger players. They’re asking: is my business going to be taken away? Am I going to lose revenue over this? But thinking a bit longer term, you will get more user traction and it will create a better user experience. More importantly, it increases the frequency of a user using your product.

What role do central banks and governments play in financial inclusion?

Clinton: Financial inclusion is quite a broad term and means many things to many people and industries. But, central banks and governments are key in driving financial inclusion. It comes from clear and transparent regulation that needs to be put in place with participation from their side and the industry. So, whatever they are putting into place, they need to ensure firstly, that it is going to be cost-effective for everyone. Secondly, they have to drive competition and innovation. So, we must ensure that there is a level playing field, in terms of how people can tackle it and how industries can get involved. We touched on interoperability quite a bit. We know it goes hand-in-hand with reducing costs and accelerating competition, but also making the offering bigger for everyone.

Muhammad: In addition to this, the role central banks can play is to push for government payments to be digitalised. In the Gambia, they started talking about pensions and a scheme to be paid digitally. I think this will also help push financial inclusion and would allow people to be onboarded much easier.

How can we improve the user experience and make it seamless for the unbanked population in Africa?

Edward: When it comes to user experience, the first interaction that you have with the customer is onboarding. I believe when it comes to the information that the customer must share with a service provider, it is confidential information, and there must be some level of trust. So, the customer must feel comfortable sharing that information and there must be some form of transparency on the product that makes the client comfortable. Also, the experience must be as easy to use for the customer as possible.

Sukhi: You need to make onboarding seamless. Users should be able to start using the platform quickly, whether they are individuals or businesses. For that, you need to balance both security and compliance along with a positive user experience, which a lot of fintechs have done really well. Compliance also plays an important role. So, we cannot forget about what it means to stay compliant with the regulators, what it means to stay compliant with all the financial authority bodies, and how you incorporate that as you grow from one stage to the next as a company.

Ababacar: We know that our population maintains very specific services and all the players who experience growth have very simple to use platforms and, as a result, are successful. People use their mobile phones to connect to others and to sell and pay. Now we also see QR codes that some operators are offering and all of this is very easy to use.

What progress should we expect to see in the years to come? What advancements need to happen?

Sukhi: This is a very exciting question because we can talk about some very creative ways of what the future is going to look like. Obviously, there is a lot of scope and there is plenty of opportunity. But it is going to require a lot of collaboration as we just covered. How can governments help? How can central banks help? How can the regulator help? And how can the fintechs and everybody else work together in this ecosystem? I also think traditional digital currencies and cryptocurrencies are something we all need to be aware of – the adoption is already starting to happen. We see it in many of the markets, but we still have a long way to go. And I am personally very excited about the opportunity here.

Edward: I think the one to watch out for is what the central banks are going to do with the CBDC. The whole ambition is that they are the custodians of these individual wallets and there will be an impact downstream for everyone in terms of MTOs, mobile operators and banks because it is shortcutting everyone out of the flow. So, that will be an interesting one to see.

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

What next?

Now that you’ve read our article we want to help you get the most out of it and plan for the rest of 2022.

Tap into our experts and schedule a free consultation.

Video: Better Together – The money transfer ecosystem

Continuing our recent discussions exploring the evolution of the remittance sector, RemitONE hosted their IPR EMEA event on 2-3 March 2022. The 90-minute panel session centred around the money transfer ecosystem, partnerships and collaboration

The panel consisted of experts from both RemitONE and our friends and partners in other global companies. In case you missed the discussion, here is a summary of the key insights.

Webinar moderator:

• Selim Mohamdi, Business Development Manager, RemitONE

Panellists:

• Wayne Gould, Head of Direct Sales and Financial Services, Trust Payments
• Priscilla D. Friedman, COO, CrossTech
• Muhammad M. Jagana, CEO, Kuringo

Time Stamps

00:00 Introductions

03:55 How significant is the remittance industry and who are the traditional and new players in the ecosystem?

07:55 How does partnering with payment gateways assist money transfer operations?

12:31 Can you provide some examples of other successful partnerships, and why they work?

16:57 What are the developing trends within our ecosystem and what is RaaS?

19:55 What do you see as the future of payment gateways? And what can we expect to see in this space?

27:40 How can MTOs leverage partnerships to expand their networks without necessarily having a presence in that country?

29:55 What are the critical questions to ask when evaluating a payment vendor or a technology partner?

How significant is the remittance industry and who are the traditional and new players in the ecosystem? 

Priscilla: The remittance industry has transformed rapidly in the last five years, and is becoming very digital. With this new transformation and globalisation, specifically during the pandemic, many money remittance service providers must focus on digital remittances to enhance their business and provide faster transactions to clients, and agents must also provide services digitally to their clients.

But the industry has become much more than just remittances. With new services such as B2C fuelled by the gig economy and B2B fuelled by e-commerce, those markets are 10 to 20 times larger than remittances. Money transfer providers are using their technology and experience to grow into segments. The traditional players in the markets are MoneyGram and Western Union, and some of the new players are Wise, Azimo and Currency Direct. As I navigate this industry, I learn every day, that new FinTechs are coming into the market with new solutions involving money transfer, digital banks, and many more.

So many different types of partnerships exist in the remittance ecosystem. How does partnering with payment gateways assist money transfer operations?

Wayne: I think the first key thing here is that the payment gateway provider needs to be able to cover all of the payment touch points. For these merchants who did not have payment methods like a simple POS machine to collect payments, they really struggled. Now on the other side of this, we collaborate very well with our merchants, enabling them to collect payments not just face to face, but also helping them digitalise their entire platform.

In addition to all of this, the right payment partner would also allow you to process funds in different currencies, as well as settle them in a multi-currency account. This is a very crucial SLM, simply because with remittances, the competition is quite rife now and margins can be quite low. So, to partner with a payment gateway, who could provide not just the technology, but also a solution that is very cost-effective, is a match made in heaven.

Can you provide some examples of other successful partnerships, and why they work?

Muhammad: Partnership is how we built our entire company. We believe that today, with technology, you do not need to build, you just need to plug and play. What we have done over the last 12 months, as a start-up, was to focus on how to expand our footprint. How do we plug in technology easily? How do we go to market where we are not? It is either you raise a multibillion-dollar fund, or you go and partner with people. Today we have seen instances where technology has made it more accessible for customers and to deliver a vast distribution network. As a result, it is uncomplicated and straightforward because we don’t have to worry about building the technology; we partner with it.

What are the developing trends within our ecosystem and what is RaaS?

Priscilla: So, innovation is improving, as we have been discussing. Digitalisation, the rise in mobile-based platform channels and cross-border transactions, and the decrease in remittance transfer time and cost drives the growth of the market.

RaaS (Remittance as a Service) is a go-to solution for many MSBs, Fintechs and small businesses and is a solution that we recommend to clients in our consulting division. So, we have the solutions that are focused on technology providers, we have some that are focused on licensing and reporting, and we also have some that are providing banking as well. Right now, we are seeing a new trend where we see a one-stop solution. But one point that is important to say is that some clients may already have some part of the solution developed. So, it is good to partner with companies that can marginalise what your need is, instead of just giving everything.

What do you see as the future of payment gateways? And what can we expect to see in this space?

Wayne: Payment gateways will always form and will always be an integral part of card payments because that is what is bridging the gap between our MSBs and their customers who want to pay. In terms of keeping up with trends, crypto is something that is picking up a lot of pace in a lot of areas and blockchain-based pay-outs, are something that is being pioneered by Ripple now. These are things that we’ll be seeing for payment methods of the future when it comes to things like payouts. In the days to come, as businesses start to evolve, requirements start to evolve. It is very critical that payment gateway or technology providers within the payment space can adapt and rise to the demands of our customers and our merchants.

How can MTOs leverage partnerships to expand their networks without necessarily having a presence in that country?

Muhammad: What we have seen, especially with our experience over the last year, is that technology has brought down the cost of integration and there is a lot of interoperability. Now, people have realised that you do not have to be a big standalone and everybody seems to be building their own small, quiet part of the jigsaw puzzle. When there is somebody who has already built a network and aggregator, this is your way in. So, you can just plug into their platform. Our clients from Europe, for example, can easily send money from a wallet or mobile phone account to your bank account, and we can also easily be in about three or four countries just by switching on a plug somewhere.

What are the critical questions to ask when evaluating a payment vendor or a technology partner?

Wayne: I think the first one is do they understand your business? I think that’s very important because everyone wants to help everybody but help needs to come in the right way. To work with a payment provider that understands the ins and outs of the business is very, very crucial. And things like, what certification or who regulates them as an acquirer, or as a technology provider is also very important.

When it comes to things like the technology, and asking them the types of platforms they work with, for the pay-ins and pay-outs, as well as what kind of security features that come with the gateway. Does it offer fraud screening? If it does, what does it run? What does it check for? And so on. These are some questions that could be interesting for an MSB to ask their provider. Another feature, which is quite important, is how soon can they settle their funds? Obviously, with remittances, we understand that funds coming in is as important as funds going out. So quicker settlements are imperative when it comes to this industry.

Priscilla: One of the things that I always ask Fintechs or MSBs who are looking for solutions is how many transactions are you looking to transact to your start-up? Are you a midsize business? That is very important because different payment providers have different tools, and they are also looking for a specific target. In addition, from a payment provider view, one of the questions that I also ask is module customisation, do you have modules for different clients? How flexible are the payment provider solutions in providing modules that are specific to that client’s needs?

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

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Video: Cryptocurrency as a Payment Method – The new growth potential for money service businesses

In our latest IPR Webinar, our expert partners from BP Ventures LLC joined RemitONE to explore the use of Cryptocurrency as a payment method in the money transfer industry, and how using the USDC can benefit money service businesses as they shift to a more digital way of transacting.

Webinar moderator:

• Aamer Abedi, CMO, RemitONE

Panellists:

• Jeffrey Phaneuf, Director, BP Ventures LLC
• Anthony Barker, Director, BP Ventures LLC
• Arif Saleem, CTO, RemitONE

Time Stamps

00:00 Introductions

14:24 What is the next big thing in the ecosystem for remittances?

17:29 How have you seen payment methods change over the years?

19:37 What is USDC? How does it compare to other USD-denominated stable coins?

23:29 Why use the USDC stable coin as a payment mechanism? 

28:27 What is the fear that MTOs may have using USDC? How do we address this?

31:31 How can we address the bank account issue?

34:45 What are the benefits of using USDC as a payment mechanism for the individual users?

37:54 What’s different from paying with a stable coin instead of traditional methods?

40:19 What is the cost to the MTOs?

43:10 How do we take advantage of the Moneygram USDC opportunity?

44:03 Risk profile of USDC vs. cash or card?

44:56 How can USDC as a payment mechanism decrease Chargeback rates & Fraud?

45:47 Margins are compressing for MSB’s, how does using USDC help increase revenues?

47:14 Are users going to use stable coins & can we settle it?

53:05 Next steps, how can we implement USDC as a payment mechanism leveraging RemitONE?

59:48 What procedures and policies need to be in place to enable USDC?

Please let us define the terms blockchain cryptocurrency stable coin and token.

Anthony: So, Blockchain is a word that you’ve probably heard in the news everywhere. It comes from Bitcoin which has a technological system where that verifies blocks of transactions (the blocks come every 10 minutes) and computers all over the world. Right now, in Bitcoin, there are over 5000 computers, called validators, that validate the transactions.

An example of a cryptocurrency is Bitcoin. Cryptocurrencies typically use blockchains. So, the ones you might have heard of might be Ripple, Stellar, Bitcoin and Ethereum. The difference between a stable coin and a token is that a stable coin is typically tied to the value of a currency. So, the one we’re talking about today is called USDC.

USDC is a stable coin issued by Circle Corporation, which is a US-regulated financial institution. It’s audited by third-party auditors. So, these are stable coins, they’re tied one to one. And in theory, you should be able to cash out $1 of USC for one US dollar.

Why Stellar? What, in your opinion, distinguishes Stellar from other blockchains?

Anthony: Stellar and Ripple would have been built up, really to focus on the international cross-border payments. At that point, Ripple was closed source; it was owned by one corporation and was really focused on promoting its XRP token, which was issued mostly to employees, founders and investors in Ripple. Then I compared it to stellar, all of the software was open-source from the beginning, and that seemed to me to be a better platform to build on where you can add additional value.

The volatility in the cryptocurrency markets, as evidenced by the fluctuating Bitcoin value graphs, can make a money service business, which obviously wants prices to be as stable as possible, extremely nervous. How does cryptocurrency as a payment method solution, that BP Ventures and RemitONE are proposing here, address this concern of volatility?

Anthony: Bitcoin and Ethereum are mostly used on these offshore contract-for-difference trading platforms, which are highly leveraged. So people are individual traders are trading at it at a 10 to one ratio or a 100 to one ratio, so you can have 100 bitcoins controlled with your one Bitcoin. So when the market collapses it has a tendency of going up very quickly and down very quickly now. But stable coins, because they’re tied to the US dollar or Euros, they are much better for remittance companies.

If you look at the bailouts that occurred in 2008, when major companies like Barclays and other major institutions went bankrupt, they had to have government intervention to save the whole ecosystem. If you look at cryptocurrency, to give them some benefit of the doubt, it’s still running. There are still transactions clearing, there’s still settlement, and the USSC dollar is still worth $1. So it is growing, and its funds are based on US Treasuries. So they’re not sitting their money in some risky offshore thing. All of their funds are in short-termed US Treasuries. So USDC is safe. With other Cryptos, there are different levels of risk.

What is the next big thing in the ecosystem for remittances?

Jeffrey: I think given the recent announcement of Moneygram’s cooperation with Stellar to offer USDC the cash in cash out, we believe that digital crypto blockchain powered payments is potentially the next big thing in the ecosystem. We’ve been involved in Stellar blockchain for a number of years. I think the fact that MoneyGram has confirmed their entry into this space, certainly confirms that using USDC as a payment mechanism on Stellar blockchain has some merits.

Arif: One of the big problems in remittances is the friction at different levels when you’re talking about international transfers. And any new technology, that can reduce that friction and reduce the cost associated with that friction, is definitely going to become more important as time goes along, especially if regulatory and other concerns can be addressed and delayed. So in that sense, it does appear as though one-to-one-backed stable coins offer a very friction-free international transfer.

USDC – what is it and how does it compare to other US-denominated stable coins like USDT and even CBDCs that aren’t mentioned?

Anthony: There are two main issuers in the United States as regulated institutions, one’s called Paxful, and the other one is called Circle. Its price equals one dollar. It hasn’t really fluctuated from that, in the past four years. It’s managed by something called the Circle Consortium, which is a group of companies that oversee the financial standards for stable coins and ensure there’s transparency around the one-to-one backing. That means for one USDC created there’s $1 held in reserves typically in a bank, or in US Treasuries. Now, USDC is available on multiple blockchains. And this is where it gets a little bit confusing for remittance companies. So there’s multiple blockchains around that are all competing, they’re vying to get adoption by users.

Why should the MSBs the money service businesses use the USDC stable coin as a payment mechanism?

Jeffrey: We believe that there are several compelling reasons why USDC as a payment mechanism is interesting for MSBs. One is that it’s fast, meaning that funds are received within 3 to 5 seconds, versus a payment that you would receive, let’s say, by a card processor that sends us the funds up to 15 seconds after the transaction was performed on the long side. So that’s one reason why we’re advocating USDC as a payment mechanism.

The second reason is that we think it’s better regarding decreasing both fraud and chargebacks. USDC payments are irreversible. And so again, my experience and depending on the MSB, we had significant chargebacks, we had fraud related to customers that would come back and were requesting a chargeback, which ultimately, and in some cases meant that we were out of the money at the end of the day. So this is where the USDC payment as a payment mechanism avoids this.

What are some of the fears the MTOs have the MSBs have about using USDC? And how do we address these fears?

Jeffrey: I think there are probably two particular items that obviously that come to mind. One is regulatory concerns when using cryptocurrency or stable coins. And that basically would be contingent on what jurisdiction the MSB is in and do they require any specific or additional licensing. The second item I would say is in the banking sphere. And MSBs normally are always susceptible to banking relations just in normal times. So certainly, bank relations are precious and MSBs may fear an impact if they offer USDC as a payment mechanism.

From an MSB perspective, as long as they meet the regulatory criteria, all they have to do is sign up with an entity like Circle to gain access to USDC and have this BP Ventures payment gateway enabled for their end-users?

Jeffrey: That’s right. To be able to assist those that have issues getting a USD Circle account, BP Ventures can assist at that stage. But for larger MSBs, yes, we would certainly recommend that they would just open the USD Circle accounts. And the fact that we’re going to have this integration directly into RemitONE means that there’s no setup fee, they’re off and running. And it should be really a compelling new payment mechanism to be able to offer MSBs customers.

What’s different from paying with a stable coin versus these traditional methods today?

Arif: So essentially, the payment process remains the same for the end-user. So, the same flow would happen, when using the BP Ventures gateway for collecting the USDC, it’s just that instead of providing your card details, you would instead be providing the wallet numbers from which the funds would be paid and the wallet to whom the funds are going to go. So, in that sense, the payment process is very similar, there’s not really a great deal of difference in terms of flexibility. One of the things about USDC tokens is that you don’t have to be in the US to use them. You don’t have to have a USD account to use USDC tokens – you could be in any country as long as it’s legal.

And what does using USDC mean, in terms of increasing revenues for our MSBs?

Jeffrey: With USDC, you get the funds immediately, you reduce your charge chargeback and fraud rates, meaning that you’re not at a loss in those areas. So, your revenues basically should go up due to the fact that the fee proposed is either for free or after 10,000. USDC is lower than cards means that your revenues again should go up, because hopefully the transaction is going to be more profitable.

And finally, are users going to use stable coins?

Anthony: So with BP, we have a certain approach that basically we think that an MSB should roll it out step by step. We’re pushing the acceptance of the USDC as the first step for MSBs. The second one is to actually as an MSB sell the USTC. So, customers can come online and actually buy the USDC and you can mark it up. Now the third step that MSBs may do in the future is actually settled with correspondence using USDC. We think that that’s going to happen in the future. We tried it previously, with tempo in the Philippines, we had it working to the Philippines, Nigeria, and Brazil. That worked. It’s just not quite there at the critical mass yet. So that’s why we’re really recommending it as a risk-based approach.

Jeffrey: We think there are a lot of compelling reasons to try it. And we’re going to try to make it from a technical side, as easy as possible as seamless as possible to incentivize people to use it, and to make the financial reason to use it as well, a compelling reason. So, we’re optimistic that it is a very viable way to make a payment.

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

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Q&A with Industry Experts: Saiful Alom

Watch the latest videos in our ‘Q&A with Industry Experts’ series, featuring Saiful Alom, Technical Customer Success Manager.

What challenges do MTOs face when transitioning from brick and mortar to a digital business model?

In our first interview, Saiful offers insights into the challenges facing Money Transfer Operators in the industry when transitioning from brick and mortar to digital solutions.

How can MTOs streamline processes and eliminate errors when sending transactions via agents?

In the second interview, Saiful explores the challenges faced by MTOs when sending via agents.

How can banks streamline processes and eliminate errors when paying out transactions via agents?

In our final interview, Saiful reviews the challenges banks face when paying out via agents, especially with regard to multiple pay-out partners.

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Video: Compliance and AML for Money Transfers – Everything you need to know

Continuing our recent discussions exploring the evolution of the remittance sector, RemitONE hosted their IPR EMEA event on 2-3 March 2022. The 90-minute panel session centred around compliance and AML for the money transfer industry.

The panel consisted of experts from both RemitONE and our friends and partners in other global companies. In case you missed the discussion, here is a summary of the key insights.

Webinar moderator:

• Oussama Kseibati, Associate Sales Director, RemitONE

Panellists:

• Richard Spink, Sales Director, GBG
• Gabrielle O. Micheals, Senior Compliance Officer, Nairagram
• Imad Chishti, Director of Payments & Compliance, Evantagesoft
• Ibrahim Muhammad, Payments Consultant, Finxplor Consulting Services

What are the main challenges facing MTOs regarding compliance and regulation? 

Gabrielle: Well, it has to be adaptability. We all understand that countries have different guides, let’s say in the UK you have FCA and in the US BSA. Sometimes when you have certain partnerships with other MTOs in this jurisdiction, it doesn’t keep up because there is that difference. The risk when it comes to businesses is knowing what you want to do. For instance, how can we work to create an effective program and how can we implement this program in a way where it protects us, our service, customers and clients. What I always would put in first is, why do you want to have a risk assessment on your operations. You need to know the first thing that you want to achieve, and that is to detect and prevent your system or your company from money launderers in any way as they always find ways of looking after our abilities, and then using that, to aid our own needs.

What is digital ID? Why is digital ID necessary? How does it impact KYC and AML?

Richard: It’s different now from what it will be. In practical terms, digital identity at the moment is an idea which has been delivered in a few countries, but it’s not global. We’re certainly not at that point where it’s making any difference whatsoever to AML and KYC processes. At the moment in terms of the landscape for digital ID, the processes are delivered in slightly different ways in different countries. Digital ID at the moment essentially means confirming proof of ID proof and address.

At GBG we ran a survey on this a year ago, in which we found for most people that means something like presenting a driving license or a passport. In 10 years we can expect the process to be the same but using a mobile phone number, and email address and a biometric and the biometric that was typically used in that process at the moment is a Face.

Particularly looking around AML Compliance, what are we seeing in Pakistan and the Middle East region?

Imad: We are seeing two major aspects that are creating an impact. One is that ever since this pandemic started, there is a drastic change in customer behaviour. From Pakistan’s perspective, the regulatory estimates that the formal and informal remittance channels are somewhere between $40 to $60 billion. This huge gap between the two channels is what MTOs, regulators and banks have been trying desperately for the past many years to somehow move informal remittances towards formal channels by offering incentives.

The second thing that we are seeing happening is that with the rise of fintech, banks are being challenged significantly. In our understanding MTOs ability to improvise and innovate is much faster than any conventional traditional bank possibly due to the kind of environment that banks are in. The key difference is that banks are compliance and risk driven. So, they will not act upon anything unless they have full assurance from their compliance and risk that everything is by book. As opposed to MTOs and fintechs’ who are very customer-driven.

What is being done to help the clients face literacy in terms of the technological side?

Imad: We feel that changing our customer behaviour goes hand in hand with the motivation, why would customers want to use something new or something different than what they have been using in the past. We have been using different incentives, some incentives are being offered in partnership with the government so there are a lot of lucrative subsidies that the government is providing not just to MTOs but also the customer.

Are E-wallets big in Asia or is that something that’s catching on?

Imad: Two things have revolutionized the financial industry. One is the rise of E-wallets. And the second is biometric verification. So now the whole population adult option is biometric verified, and there are roughly 45 million registered mobile accounts in Pakistan right now from a population of 120 million with an adult population of 70 to 80 million. You can see that compared with 15 or 16 million bank customers mobile wallet density is much wider. 

How can regulators balance evoking trust for consumers whilst avoiding stiffening innovation in the industry?

Gabrielle: Well, regulators are awakening key innovations in the industry, and also carrying improvements. We can see some cases where a new regulation comes out it gives new ideas and birth to new technological innovation that comes forward. People are beginning to try different things.

Would you say stakeholders like the Central Bank in the remittance industry have also invested heavily into tech as MTOs and Fintechs have?

Gabrielle: I won’t say they have all adopted the whole culture of being completely Technological. If banks have I don’t think we’ll have many issues and it’s just a case of plugging your API. I think everybody it’s still in the process.

Oussama: I think that’s one thing I look forward to in the future, while things become more centralized and people become open to APIs, it would be just easier to connect everyone. And again, pass information through. So rather than you need to report to the authority every month, your system will simply push that information through overnight. It removes that human error or a part of it. Again, they only have access to that part of the system that they need the information on to see velocity checks and things like that. It’s a positive thing to at least hear that, particularly in your region they understand that technology is the way to go. 

What are the individual different tools within IDV? 

Richard: Identity verification Traditionally meant physically, or physically looking at a proof of ID in a proof of address document. Lots of businesses will still do that whole face-to-face verification. COVID has changed that landscape. If you think about IDV it’s the process of checking, providing proof of address, and digitising that has delivered two core pieces of technology. Confirming someone lives at their address has traditionally been the quickest way to run this process.

However, it only works if the source of data confirming that someone lives at their address is good, if the data isn’t any good there’s not much point in trying to use that data. All the new technology is around proving identity by using an identity document but also proven to look at as part of that process

Imad: We are developing some data-driven decision tools for making real-time AML decisions, and we are making some tools for real-time customer profiling aggregation of data. We are interestingly working on face verification, and voice biometrics, this is especially important for countries like Pakistan where the infrastructure is not good, the more you go outside urban areas infrastructure is dependent on telecom services.

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

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