Intelligent Design and the Digital Wallet Evolution
The shift to digital payments and money transfers has been evident for the best part of 10 years. This article looks at the increase in digital wallets over recent years, the benefits of wallet functionality, and the role of digital wallets in the road to financial inclusion.
Features and Functionality
Digital wallets are essential vehicles for storing and making payments online or with your mobile phone. Mobile wallets are instrumental in facilitating instant, contactless payments, online payments and can be topped up from bank accounts or with cash, making them a widely favoured payment vehicle when compared to other traditional methods. In addition, a digital wallet eliminates a range of friction points when compared to its physical counterpart; there’s no need to input card details or PIN to make payments. These features also prove vital for users when it comes to money transfers, making wallet-to-wallet transfers faster, safer and cheaper than ever before [1].
Mobile Wallet Popularity
At the end of 2020, over 2.8 billion mobile wallets were in use, with cosmic popularity across Asia, Africa, and the Middle East [2]. Moreover, when it comes to digital money transfers, mobile wallets are now used 50% of the time, surpassing other methods such as PayPal, credit cards and traditional bank transfers [3].
It’s clear that mobile wallets have gained enormous popularity worldwide in the payments and e-commerce world, and this trend is only set to continue, with an expected user increase of 74% over the next five years. In particular, in Europe and the Americas, digital payments are being dominated by mobile devices.
The payments industry mobile wallet evolution is driving a significant change in the fintech and money transfer realms.
The Merging of Industries
Mobile wallet payments usage is causing a seismic shift in consumer behaviour, especially in money transfers. Alongside the change towards digital remittances, a vital part of the mobile wallet evolution centres around creating a new marketplace in which these industries – retail, airtime, utility bill payments and remittances – are brought together.
The merging of industries through mobile wallets also brings about further benefits. It makes it possible for these industries to tap into other verticals, creating more opportunities for transactional growth for supply-chain members and offering much more power and choice to the consumers.
As consumer demands continue to grow, the need for industries to unite becomes even more apparent, and with it comes a need for a ubiquitous wallet. We’re predicting this trend to snowball in the coming years, expanding the marketplace and thus fulfilling the needs of these industries and making money transfers more seamless and cost-effective.
The wallet will itself serve as a front end or gateway to these industries, literally putting the various services of these industries in the palm of the user/consumer.
Wallets for Financial Inclusion
The growing demand for money transfers and the shift to a digital world that we’ve been exploring brings us one step closer to financial inclusion.
The features and functionality of wallets offer great potential for breaking into unbanked regions, allowing users to access the financial system without the need for a traditional bank account. In fact, studies have shown that smartphone penetration now outpaces bank accounts [2]. It seems that wallets could be a solution for many users who prefer to remit money or make payments through an alternative to traditional money transfer methods.
While we’ve seen that 2.8 billion mobile wallets are currently in use worldwide, a staggering 1.7 billion adults remain unbanked despite two-thirds owning a mobile phone. The wallet is a replacement for a bank account for this 1.7 billion. This presents an enormous opportunity to Fintech players to put their wallets – with a range of backend services, including money transfers – in the hands of the unbanked via the mobile phone.
With the growing demand for digital money transfers, the increasing use of mobile devices, and the uniting of verticals, it’s clear that the payments and remittance industries are entering a new stage of their evolution. As consumer demands focus on more convenient payment methods, we can cautiously infer that mobile wallets will be critical on the journey to offering fairer transactions and overall financial inclusion.
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References
[1] https://imeremit.com.np/blog/cross-border-remittance-and-benefits-of-digital-wallet
Video: The International Money Transfer Market – Challenges, trends and 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 enormous rate of change over the last few years in the money transfer market, resulting in new technology, higher customer expectations and endless opportunities for MTOs.
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:
- Aamer Abedi, RemitONE
Panellists:
- Elizabeth Rossiello, CEO & Founder of AZA Finance
- Hasan Fardan Al Fardan, CEO at Al Fardan Exchange
- Leon Isaacs, CEO & Founder of DMA Global
- Alex Orechoff, Financial Services Vertical Growth at Worldpay from FIS
The World Bank reported remittance flows grew by 7% in 21, and declined by only 1.7% in 2020. This is despite the severe global recession caused by COVID-19. What factors do you think have contributed to this growth?
Leon: The first point in the question is about the resilience of remittances. The people who are sending remittances need to send money and to support them both with consumption and investment needs. And that need doesn’t just disappear. In fact, it probably increased during COVID times, as families back home, found it even harder. So it really meant that people who were sending money were even more committed to finding ways to do it.
One of the key things is the changing ways in which money was able to move. So the shift to digital has clearly had quite an impact. And now every company that makes any pronouncement on remittances, is always talking about their digital strategy, how that’s making a change in what they’re doing. And I think this focus has really helped to actually bring more some more people to the market.
Hasan: I very much echo and agree with a lot of the sentiments obviously, you know, the market that we predominantly serve is the second-largest market in the world. And obviously, the organisations that had a higher degree of digital preparedness, I know people talk about transformation, it’s a big buzzword. But ultimately, it needs to translate to some degree of digital preparedness – companies that were definitely much better prepared, and benefited from drastically converting traditional cash business into a digital business.
The biggest risk with a sector is the lack of regulatory oversight, and you don’t have the benefit of robust KYC, AML, and general compliance framework, so something that we’re definitely addressing at the industry level.
Alex: What Leon was mentioning as well, is that a lot of what has happened, thanks to COVID is that people have been introduced to new digital options, and that has forced companies to really innovate quickly and offer a lot of different avenues that people were not necessarily curious about before. It hasn’t been the best onboarding experience for people, because we’ve been just trying to get everything online for our partners as quickly as possible. And it’s not necessarily the most efficient.
Elizabeth: We process for over 28 of the largest remittance companies out of and across the African continent. And already six years ago, one of our fastest-growing operators launched a corridor into Nigeria, digital-only, and it was the fastest-growing product they’d ever launched. Before that, they were a cash-only agent collection remittance company, mainly out of North America.
So for me, I don’t know why we even use the word digital, because it’s what is remittance without digital at this point? And what are financial services without digital? So, you know, we don’t even think, to work with companies that don’t have a digital offering. It’s like saying, “what is digital banking?”, everything is digital these days. And we need to go beyond that. It’s not just how to get things digitised, it’s how to streamline operations and optimise in a world that’s so fast-moving.
From a technology solutions perspective, there is literally a 100% shift to digital. But is it still fair to say that there is still a lot of emphasis on cash? How do we reconcile the two comments here?
Elizabeth: Well, first of all, even cash networks use digital verification networks. I mean, nobody picks up cash with a paper slip anymore. Nobody goes really into the bank with a printed out terminal, you’re getting a mobile code on your phone, and then you’re going to the cash agent network. And the cash agent network is dominated by mobile treasury and float operations that are digitised. And if they’re not, they’re not going to work.
So I think the companies that aren’t thinking about that, from a user perspective, from a mobile perspective, are missing out. And again, it’s not just the app, it’s also the cash management, the operations, the treasury management.
What is it like in the UAE? Do you have some data to share about this channel cannibalisation from cash to digital? Is it supporting what others are saying?
Hasan: Now there’s a very large uptake and a very large migration from traditional cash to digital and the rate of growth is very aggressive. However, cash is still very much dominant, from numbers that I have seen still around 70-80% of the market is still operating on a cash basis and it’s not necessarily because of the lack of availability of digital solutions or digital touchpoints. As an organisation and I think as an industry as well we hear a lot of emphasis on digitally-driven financial inclusion, but digital inclusion doesn’t mean that you exclude the cash customers as well.
So the future is definitely digital and the migration is definitely much higher and it will continue to accelerate in the coming years, but I still see it being relevant in the medium term.
Aamer: So you have regulatory pressures, of course, for example in the UK and Europe there is a lot of pressure to go digital. So if you’re a cash-based business the regulator just makes the landscape really hard for you to operate. The companies that collect cash from the agent shops etc are dominated by a single player which doesn’t make it conducive for other participants to participate in a fair manner.
Based on the research data that you have access to, is there a market out there where the consumers are refusing to go digital and want to carry on using cash? I know there are a few regions that showed a lot of reluctance.
Leon: I think that it depends on which region of the world as to how fast it gets there and I also think it depends on your time horizon. Some parts of the world have been going 10 years or more using various digital services and the benefits to the users are normally so self-evident you do wonder why people don’t change, but there are a lot of cultural and historical factors.
Also, we have to remember a lot of people in the world have come from countries where they haven’t necessarily had significant amounts of money themselves and also, they haven’t trusted governments or local banks – they think governments may have influence over banks or banks have collapsed and so. There’s still a generation out there that has deep mistrust in anything that’s not physically in their hands or in somebody else’s.
When cash is still king for domestic payments, it is very difficult to then accelerate international payments to make a real dent. So what we need to do is continue to encourage domestic adoption and then the international will flow much more easily.
Alex: What it pulls down to are habits and trust. Anything you have to change a habit is a point of friction, it’s not something that you want to do or you feel comfortable doing, even if all the logic says that you should be doing this new habit. It’s just human nature. So if you’re using cash most of the time chances are you’re going to prefer to do cash in this transaction, and you have to have a really good catalyst to push you off that previous habit in preference.
Aamer: So basically, the panel of experts here feels that the statement ‘cash is king’ is an overstatement. The rate of transitioning that’s happening right now from cash to digital is happening at a pace we hadn’t imagined, it’s so rapid. One of the big three players, I think close to 30/35% of their total remittance volume is digital. Contrast this to 3 years ago when I was in one of the conferences, digital was over 5%. So over a period of three years, one of the big three players’ digital remittances have increased from 5 to 30% which is significant.
From a payments industry perspective, what do you think is coming next?
Alex: One thing is how do we make a frictionless experience for customers and how do we enable that? How do we enable people to grow quickly into the corridors that they want to be in? And how do you ensure that you can have a real-time treasury in the future? Because that’s obviously one of the biggest challenges that a lot of remittance companies have today.
We’ll definitely see greater use of cryptocurrency and CBDCs, but thankfully that’s a ‘future us’ problem – I would say that’s more of a 5/10-year pursuit, depending on where the various central banks are going, in which case we are going to have to think about what are the other things we offer to expand our breadth of products and to add more value to our various customers on the side of paying in but also on the side of paying out.
Can you just define ‘Super App’ and then we can discuss what we mean by this all-encompassing mobile app?
Aamer: There’s a new buzzword we’re hearing ‘Super Apps’. I was in Saudi Arabia a few months ago and I was using one of these taxi services like Uber, Kareem, Bolt. One of them was offering something interesting – they were offering on the app the ability for someone to order a nurse and they would send a nurse within 24 hours to do a Covid test or a PCR test etc. and this is all happening from that one ‘Super App’ if you will, and that’s the buzzword here in our industry.
A lot of these new companies from neighbouring verticals/peripheral industries have an established customer base and they are always thinking of generating revenue from new sources and remittance becomes the obvious choice. It’s a case of APIs. The API these days, from technology vendors especially, are so sophisticated that it’s just a case of plug-and-play. So if you have an existing app you can simply plug into RemitONE’s API and take advantage of the services they have through the API so there’s not much work to do.
Alex: That’s where you’ll see that as a key thing and it also happens to be because you trust the brand that is all-encompassing on that ‘Super App’ – we trust Kareem because it gets us from point A to B and therefore anyone they’re selecting is probably going to be trusted as a result. So that’s the big benefit of the ‘Super App’ that you mentioned there.
Elizabeth: We’ve had digital ‘Super App’s for over 8 years over the African continent and AZA launched the first ‘Super App’ which went from just mobile money wallets to offering health services, government payments and even some banking services. It even had a white label for banks to use as well and what we saw was a real success for services that were adjacent to its core business, but services that were too far off like the medical services ended up being replaced by companies focusing on that.
So for companies that are coming from the traditional brick and mortar space, they’re facing even more of a challenge for them to launch something so agile. What we also recommend for customers that want a white label is to work with companies that know what they’re doing like RemitONE. They have a great product it’s a white label product but maybe think about devoting a team to just doing that.
What obstacles or challenges do you see along the horizon what do MTOs or exchange houses in the money transfer space need to prepare for now?
Leon: One of the obstacles is if you’re not doing a fully digital solution now then either you’re too late or you need to do something immediately – you’re probably too late, but if you’re not doing anything that’s probably the biggest thing.
I think we also have big problems still with de-risking. I know we’ve probably been talking about this at conferences since at least 2012 if not before and I think it just rears its head in a different form.
It’s one thing of course to say that we want to go digital but actually doing the transition is a challenge in itself. As a very successful organisation in the Middle East, what are your thoughts on this? What are the typical challenges an MTO would face as it transitions?
Hasan: You have to start from the perspective of the UX and I echo some of the comments from my colleagues here, provided you can deliver a seamless customer journey generally that really is the basis of transitioning your customer base. I would say players have different degrees of success, of how well they can execute that. You are seeing an environment of offline margin, you are seeing an environment of increasing compliance costs so really only the highly compliant and highly competitive and highly agile businesses will continue to succeed.
Who do you see winning the ‘Super App’ versus Marketplace battle when it comes to accessing financial services?
Alex: It’s going to depend on what other aspects of the market we’re talking about, so there are going to be situations where the ‘Super App’ is going to be preferred – either because that is the place where there’s the brand and the trust. Or that that’s where they’re getting other services that they prefer to use because it’s all of them in one place. It’s easier to just accept that I’m going to have a higher price or that I trust I’m going to have a better price for my remittance through the ‘Super App’.
Elizabeth: I think the marketplace where you’re going online is not something that the younger segments are using so we’re not seeing that inherent in the youth population, so I think customer segments are pretty split depending on age and just digital nativeness.
Leon: I think it ultimately comes down to who owns the customer and if you’ve got the right product. I would tend to lead towards a ‘Super App’ having more to offer than a Marketplace by definition, unless you actually own the customer accessing that Marketplace then you’re going to be challenged.
For more information or to request a free consultation with one of our money transfer specialists, please email marketing@remitone.com
Questions-réponses avec l’expert de l’industrie: Selim Mohamdi
Regardez la dernière vidéo de questions-réponses, mettant en vedette Selim Mohamdi, Business Development Manager, RemitONE.
Dans notre entretien, Selim explore la relation entre l’adoption des paiements mobiles et ce que cela signifie pour les transferts en espèces, ainsi que le rôle de la crypto-monnaie et de la blockchain dans le processus de transfert de fonds.
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Q&A with Industry Experts: Selim Mohamdi
Watch the latest Q&A with Industry Experts series, featuring Selim Mohamdi, Business Development Manager at RemitONE.
In our interview, Selim explores the relationship between the uptake of mobile payments and what this means for cash-based money transfers, as well as the role of cryptocurrency and blockchain in the remittance process.
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Q&A with Industry Experts: Oussama Kseibati
Watch the latest Q&A with Industry Experts series, featuring Oussama Kseibati, Head of Business Solutions at RemitONE.
In our interview, Oussama offers insights on the struggle with legacy systems, the future of mobile payments and how this will impact the use of cash in the short, medium and long term.
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Predictions for the Money Transfer Industry in 2022
Recent years have certainly reshaped the world of money transfers. The pandemic presented new challenges and the industry responded with innovative solutions. In 2020, we saw a great demand for mobile and online payments, driven by Covid-imposed restrictions worldwide – an astonishing 62% of banking customers considered switching from physical to digital platforms in 2020 alone [1]. It’s clear that this pace of change is showing no sign of stopping, so let’s explore the new trends and our predictions for 2022.
Cash v Digital: The Consequence of an Age-Old Question
An answer commonly sought in the money transfer space is whether the competition between cash and digital money transfer finally has a winner. Although it’s clear that cash isn’t going anywhere yet [2], digital remittances are continuing to rise, even outside the peak of the pandemic.
Customers and Money transfer Operators (MTOs) alike value convenience, security and cost-effectiveness; all of which can be easily offered by mobile and online payment systems. For example, eKYC, digital AML, payment gateway and other 3rd party API solutions solve regulatory issues and give instant access to remitter, beneficiary and payment information. In addition, they also allow for changes to exchange rates while offering transparency to supply chain members and automating manual tasks.
As more MTOs enter the mobile money transfer space [3] – and the number of people with access to mobile devices increases [4] – digital money transfers will continue to evolve and thrive. This evolution has already made the role of technology solutions providers in this space mandatory. As a consequence, we predict we’ll be seeing these providers become a permanent part of the supply chain landscape.
Rise of Money Transfer Machines
Over the past 2 years, the money transfer industry has witnessed an array of technology features – that normally would have taken years to develop – reach the market within just a matter of months. Features such as Artificial Intelligence (AI), Big Data, Blockchain, Digital Wallets, Machine Learning (ML) and Open Banking are all entering the money transfer space. As a result, the role of technology solutions providers is becoming a mainstay in the landscape, and we can expect 2022 to be the year where these features are implemented.
The Uptake of Blockchain Technology
Most recently, there has been an increased use of blockchain-based technology for cross-border payments. The decentralised nature of blockchain not only speeds up transactions and reduces costs, but also has inherent security features which are tough to breach [5]. In addition, blockchain technology has an innate value that can eliminate the need for pre-funding in money transfers. Consequently, it can eliminate the biggest stumbling blocks for fintech start-ups in the money transfer space.
Open Banking
Another feature we’re currently seeing increasingly utilised in Europe is Open Banking. With the ability to connect banks, technical providers, aggregators and other 3rd parties, Open Banking has allowed for a more seamless, transparent, secure and cost-effective experience for individuals.
Open Banking-powered money transfers appear to be improving the entire customer experience, reducing transaction costs and processing speeds in comparison to more traditional methods of payment. With the growing demand for improvement we’re currently seeing, it comes as no surprise that this is one trend we’re expecting to thrive.
Mobile Wallets
We’re also expecting that the definition of a mobile wallet will change in 2022. Whether it’s a send or receive market, the wallet functionality will add a host of services, including utility bill payments, airtime top-ups, micro-loans and wallet settlements. The digital wallet is en route to becoming a universal mobile bank account, through which all daily transactions of varying types will occur, regardless of where the individual is based.
What can we expect now?
Companies from neighbouring verticals such as hospitality, travel and telecoms are considering diversifying their product and service portfolios. Telcos, for example, are exploring ways to offer their own proprietary wallet with a variety of features, including money transfers, to customers. Taxi businesses are a further example of companies that are opening up remittance channels, so their drivers who are paid into wallets can send money directly from the wallet to their loved ones.
As a result, we can expect new alliances between previously disconnected verticals to take root. We can expect a rise in more Fintechs using a plug-and-play model to deliver a new breed of services involving money transfers. And finally, we can expect more aggregators to facilitate open-loop payments with instant delivery times.
To conclude, the main thing we’re predicting this year is diversification. From Open Banking and digital payment solutions to the coming together of firms from different verticals, we’re predicting more opportunities for Telcos, retail shops, MTOs, aggregators to deliver value to the customer through the digital wallet. The customer – the individual with a digital wallet – has never been in a better position to avail a variety of fully transparent services at cost-effective rates.
References
[1] https://newsroom.mastercard.com/eu/documents/mastercard-evolution-of-banking-2020-infographic/
[2] [3] https://www.remitone.com/ipr-report-2021/
[4] https://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/
[5] https://www.ibm.com/uk-en/topics/blockchain-security
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Top 5 takeaways from the RemitONE Compliance for Money Transfers panel at IMTC EMEA 2021
Earlier in the year, a few of the key players in the remittance industry digitally gathered together to discuss a wide range of key topics within the field of money transfer compliance in a panel hosted by RemitONE. The panel included deep dives into anti-money laundering practices, responding to suspicious activity, OFAC compliance (Office of Foreign Assets Control), and much more.
Moderator:
Oussama Kseibati, Head of Services at RemitONE
Panellists:
- Ibrahim Muhammad, Independent Payments Consultant, Al Fardan
- Nadeem Qureshi, CTO, USI Money
To condense the panel into a few paragraphs would be a tricky task indeed, so we’ve decided to focus on five of the key takeaways that our panellists settled on during their discussion.
1. Cybercrime requires a threefold solution – Ibrahim
There are two different types of financial crime. Broadly speaking, on one hand, there are crimes related to money laundering, terrorist financing, fraud and cybercrime. On the other hand, there is financial crime related to bribery and corruption. When it comes to the money service sector it’s the former type of crime that’s been on the rise recently, thanks to the pandemic and the increased digitisation of companies.
How do we prevent these attacks? It’s a threefold solution. First, companies need to ensure the right people are in charge of their systems – this means people with a clear understanding of risk assessment. Second, they need to put well-documented processes in place, guided by policies and procedures. And finally, the systems need to be robust enough to identify, prevent and deter financial crime.
2. Plugins have made all the difference – Nadeem
The availability of plugins is gradually taking us away from an environment of weekly updates and into a more active, real-time environment. What used to take weeks can now take place in the space of days or even hours, with lists being updated and names being added constantly.
Working with something which is real-time means it’s so much easier to identify a weakness faster. These days you have customers registering and processing within a matter of minutes. But as we’re working towards that more efficient way of processing, it’s vital that the system is robust and is set to your needs as opposed to the system needs.
3. There are two sides to the story – Oussama
There are two main sides to the new compliance regulations that we’re seeing. It’s not just where you yourself operate, it might also be where and whom you’re sending to. What kind of regulations do they have and what are their maximum receive amounts, for example?
We have to understand this because there’s an ever-changing landscape right now with new rules and regulations being set all the time. Unless you’re on top of those changes, then you’re always going to be putting yourself at risk when partnering with someone. It’s also worth noting that a lot of the regulations come from the central banks and they will have their own lists and connections that you’ll need to take into account.
4. Transaction monitoring and risk profiling are key – Ibrahim
Transaction monitoring is a key part of KYC and should always be an ongoing process. When we onboard the customer, that doesn’t necessarily mean we’ve 100% verified them. It’s the ongoing transactional behaviour of the customer that allows us to do that and this is where profiling plays such an important role.
You need to do a proper risk profile or categorisation based on the transactional behaviour of your customers and categorise these customers into different risk profiles at both the customer level and the transactional level. Of course, there are multiple systems, including RemitONE’s, that can facilitate the onboarding process and ensure that the customers are who they claim to be. But they can also track where money is going so that, for example, if the destination country is high-risk then additional checks can be put in place and appropriate limits can be set.
5. Creating an effective monitoring programme is all about asking the right questions – Nadeem
The first thing to do when building a transaction monitoring programme is to really look at whether you’re a B2B, B2C or B2B2C service. Once you can answer that question and are able to identify your customers, it’s much easier to break everything down. After this, you need to answer the question of the dual jurisdiction process – the rules and regulations in the sending and receiving countries.
Finally, once the system is configured, you need to ask whether or not it needs to be looked at a little deeper. Because so often you’ll rush to go live and there will be a tech anomaly that was overlooked or a parameter that wasn’t set right. Once you can confidently answer all of these questions, only then can you create something in terms of a robust framework, whether it’s for monitoring or compliance.
We’d like to extend a huge thanks to Ibrahim, Nadeem and Oussama for their time and insights.
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Video: The Digital Payments Boom – How to profit?
Continuing our recent discussions exploring some of the challenges and opportunities being faced by the remittance sector in these uncertain times, RemitONE hosted a webinar on the 24th of June 2021 regarding the digital payments boom that has come as a result of the COVID-19 pandemic and the rise of open banking. 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:
Ziad Mannan, Head of Engineering at RemitONE
Panellists:
- Walter D’Cruz, Director at Moneo Solutions and CEO at Livil Ltd
- Nadeem Qureshi, Chief Technology Officer at USI Money
- Mahmood Kamran, Managing Director at EToro
- Damien Cahill, Chief Operating Officer at Vyne
We’ve seen a lot of drastic changes in the payments industry in the last five to six years, particularly in the area of repayments or wallet payments. What have been the main developments in this industry?
Walter: There are certainly a lot more choices out there that have sprung up over the last five or six years, whether that’s faster payments, open banking or blockchain. One major development that I’ve noticed personally is in compliance. Although it can be a bit of a logistical headache, it is fundamentally important to all of our businesses. Because without compliance, there is no business. Technology, meanwhile, is being led by the fintech industry so it’s important that everyone else in the sector pays attention to what they are up to so they don’t get left behind.
Mahmood: The past five years have been great for the payments industry by and large, particularly in the past two years as COVID acted as a catalyst that forced payments to become digital, even in markets that were dragging their feet. Digital adoption rates have gone up by 200% and eToro saw 800% growth as businesses began moving to contactless payments. The pandemic fundamentally changed the way customers behave, the way we perceive threats and risk and how we adapt to operational challenges.
What is open banking and how does it work?
Damien: What open banking essentially does is remove all of the potential failure or friction points in open accounts and open payments. Because, at the end of the day, a card is nothing but a passport to a bank account, and all the stuff in between is border control. The Payment Service Directive 2 (PSD2), is a pretty wide-ranging piece of legislation, a piece of which essentially asks the banks to open their doors to tech companies and let them stack account information providers and payment initiation providers. It’s fairer because the cost is reduced, the controls applied by card providers are removed, the success rate is higher and most fraud aspects are removed because there are no 16 digits out there in the ether. It’s a bank-level transaction with biometric authentication that is married to the bank’s data and app. So it’s more or less 100% secure.
In what ways can instant payments become a factor for competitiveness and differentiation?
Nadeem: The objective at the moment is to achieve a real-time settlement environment. The fintech industry is moving so fast that you have to stay ahead by retaining your existing clients. One of the things driving this push is customer expectation as everyone wants access to their funds and in this regard PSD2, has created a legacy issue that we’ll probably continue to see develop over the next five years. Overall, however, not only do instant payments reduce risk, but they enhance things like reporting and onboarding too. In the supply chain, meanwhile, there is ample opportunity for new players to enter the space. For institutions though, any competitiveness is going to mean evaluating tech and reassessing functionalities such as the onboarding experience. It’s a growing trend that we’re only just seeing the impact of.
What are the implications that instant payments by open banking will have on the existing money transfer infrastructure?
Nadeem: In terms of positive implications, using open banking APIs would allow us to create a more level playing field with the older established banks. Open banking allows us to use secure channels effectively and gives the consumer a better understanding of their finances and a greater degree of flexibility. It also not only leads to new client acquisition but ensures we retain existing clients through cross-selling opportunities, forcing us to increase scalability and digitalisation. Every day we see innovations and PSD2 has opened unimaginable doors for us. Over the next few years, we will really start to see these functionalities being utilised. You may see the decline of cash and cards and people won’t want to even carry a physical card anymore, just a phone. It’s the one thing you don’t want to forget when you go out.
Can MSBs build more profitable client relationships by leveraging instant payments and open banking?
Walter: The formula hasn’t really changed. Instant payments are instant payments, the cost base is going to be the same across the base, as is the SLA. Personally, I foresee the growth of subscription-type models as there’s no other way you can build profitability in a market that has shrinking margins and increasing compliance costs. Subscription models are incredibly efficient, as if you’re paying someone each month, you’re more committed to using it as opposed to downloading competitor apps. The cost of customer acquisition isn’t decreasing either. You have to be innovative in how you bring customers in ahead of regulation and competitors. You can’t afford to sit back.
How are instant payments being positioned in the Middle East and Africa? Are they being positioned as the new normal, or premium services and what can MSPs do to set their offerings apart from those of the others?
Mahmood: What was once the premium is now the new normal. So now, with each transaction you’re always asking yourself “why does it need to take 3 to 5 days, why can’t it be instant?” This is always at the back of our minds. If a bank is not ready, such as in developing countries that are still working on legacy systems, they will be taken over by the new technology providers with the means to bring them into the modern age. We’ve seen this in the middle east as well. Banks need to catch up to this regime. The Singapore and Malaysian banks have adopted fast payment systems similar to what we see in the UK but the central banks in the middle east really need to start catching up.
When you’re looking at a payment gateway or provider, what are the critical questions to ask when evaluating a provider?
Nadeem: The key areas are reliability, settlement times and transactional cost. It’s best to go through recommendations too. Sometimes we don’t pay attention to the various card types and settlement fees but these are big issues if you’re a high turnover business. For example, you may realise your 0.2% became 0.4% because you didn’t factor in X, Y and Z. Look at the term of the contract for flexibility too. In such a fast-growing industry I would not want to tie myself up in a 2-year contract. Big innovations are happening. We also need to look at the merchant experience, the types of ports, the efficiency and the support. It’s these small areas that we sometimes tend to miss that are actually often the most important.
How does fraud play a challenge to instant payment – does faster payment mean faster fraud?
Damien: I don’t think it means faster fraud. Quite the opposite actually. Fraudsters will always try to penetrate systems, that’s what they do. But with the strong customer authentication that’s been brought in now, it’s no longer acceptable for the consumer to just have 16 digits and the expiry date, they’ve got to have two out of three prescribed things – something you are, something you have and something you know. For example, OTP (one-time passcodes). If you look at the way Vyne is set up, the transaction initiates through biometric ID into the banking app. It would be very difficult to defraud that system because your face or thumbprint is more secure than having 16 digits flying around. The way fraudsters work with card payments is they execute phishing attacks to get you to verify your card details. They’ll obtain tens of thousands of details and then run velocity check transactions with one pound to a charity if it goes through, then they start spending money with a remittance company or a retailer. You can’t phish attack those bank account things because it’s a closed loop. You can’t phish attack thumbprints or face ID.
What about the impact on profits? What will we see if we throw digital currency and blockchain into the mix?
Walter: I think you’ll see an increase in profits and the cost of compliance will definitely go down. As long you’ve got an efficient office and a way to connect to your partners then you’re always going to be ahead of the game as opposed to being stuck with a legacy system that takes forever to change or route to a different payment channel.
Mahmood: Cryptocurrency is going to continue to evolve as a method of payment. Visa recently launched their product which is based on USDC, a stable coin. They’re planning on doing the same for GBP and Eurostable coin and they’re looking for partners to initiate this. This becomes a settlement currency and represents the evolution of what digital currency will look like in the future. It’s interesting, 6 years ago I thought this was all a scam, now I’m saying it’s the future. It’s evolution.
What’s next, what’s coming up, what should we expect to see in this space in the next few years?
Mahmood: I believe you will see increased use of digital wallets and the way digital wallets are used. The behavioural change will happen. In fact, it’s happening now. A key player in this landscape, mainly for UK and Europe, is strong customer authentication, particularly biometric authentication. Strong customer authentication will be implemented as every cardholder and every merchant has to comply with this rule, and you’ll see that this makes a big change in the way by which digital payments will happen in the next twelve months. I also see cross border payments becoming more popular.
Walter: I want to talk a bit more about embedded finance services in markets like Africa, where the app will have the ability to get some micro-financing to finance lives on a smaller level. That’s definitely going to be driven by blockchain. I also think there’s going to be a lot of consolidation. Everyone is into it right now, and if you look at it historically, this isn’t a “fad” or a “trend” anymore – it’s a fact of life. In terms of crypto, you’ll see stable coins being a part of the central bank digital currency world. So settlement and liquidity for cross border payments will be instant. You’ll also see cryptos take different roles in terms of regulation. I don’t expect global consistency anytime soon though. That’s going to take a lot of time and a lot of trial and error.
Nadeem: There are the things we’re predicting, and things we’d like to see and there’s a lot of excitement and worry (on a technical level) when it comes to how we’re going to achieve these things. Personally, I think we’ll see great strides being made in the onboarding experience. Whether it’s by using open banking APIs or some other innovative tool, in terms of consumer experience, logging in and making a transaction will be extremely fluid. A lot of changes are going to happen but nobody can really predict how things will be in twelve months, at least not 100%. The generic product will be the same but the execution might be completely different.
Damien: A lot of things. Everyone said 2020 was the year for open banking. But it wasn’t. 2021 is the year of merchant adoption and 2022 will be the same but with more of an uptick of consumers getting involved in cryptocurrency and open banking, the adoption rates for which have been massive. It’s easy to see why too – they make the world of payments far easier for consumers and merchants alike – for operation and efficiency on the merchant’s side and for organising digital life for the consumers. It makes your business measurably better. Honestly, my message is adapt or die, crypto is the new technology, like it or not, it’s here to stay. There’s no stopping innovation.
Our thanks to Damien, Mahmood, Walter and Nadeem for their words and their time.
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Video: New Tech in an Old Business – The new products redefining the best in class.
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 23rd of June 2021 regarding the new products that are currently redefining best in class practices and the technology that drives them. 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:
Oussama Kseibati, Head of Services at RemitONE
Panellists:
- Walter D’Cruz, Director at Moneo Solutions and CEO at Livil Ltd
- Stone Atwine, Founder at CEO at Eversend
- Nelson Irizarry, Co-Founder and Chief Operating Officer at Paykii
What new technological advancements are now being utilised in the traditional remittance industry?
Walter: I was really looking forward to answering this one because I believe a lot of technological advancement is being driven by external forces like the regulators, banking partners and the market. For me, it’s about who adopts the technology faster and the technology I’m talking about specifically is regulatory technology like ID verification, KYC transaction monitoring, open banking, instant payments, digital payments, digital banking, artificial intelligence and, of course, blockchain. For me, those are the main drivers. The challenges companies are facing, however, largely stem from the ever-evolving beast that is compliance and the costs associated with it. A lot of fin-techs out there are reducing that cost whilst providing excellent services and as we move through this new environment, traditional remittance companies are going to have to play a big game of catch-up.
We know that regulation and fraud are the biggest challenges in the industry. What new tech is out there to overcome these challenges?
Stone: Regulation is a big pain, especially for those of us trying to upgrade across multiple countries on the African continent. Being a new-age player, we tried to do everything electronically and what we’ve seen in the software we use for everything from onboarding and compliance to KYC and anti-money laundering is that there are some major advantages the traditional players might not have noticed. For example, it helps us with integration and analytics so you can figure out if you’ve got 30 thousand or 50 thousand customers and how many of those customers did KYCs. In terms of fraud, we’re seeing many interesting solutions too. We’ve built a tonne of fields internally in Eversend alongside a new technology that allows you to spot potential fraudsters from their email address, phone number or even the gadget they’re using across different applications. I think the thing that really changes the game though is the ability to do all the required KYC diligence remotely without actually being close to the customer. We’ve seen improvements in liveness checks, for example, so that when somebody signs up on their telephone you can take a short video selfie and the technology now can figure out if this person is who they say they are.
Oussama: It’s also about customer experience; the better we have these solutions in place, the quicker it is for you to onboard someone not needing to be there. So they are on their mobile phone and take their picture and all the checks are done instantly so you can onboard them right there and then.
What have traditional remittance companies had to do differently as a result of this new technology?
Walter: You can’t replace a physical asset like cash; you have to go through to the digital world which offers a simple way of banking and topping it up with cash. Look at some of the challenger banks like OneZone where you can top up to £300 or £500 a month in cash. You go to a top-up agent, put your money in and it’s in your account within minutes. The cash economy is working right now still because there are older generations looking at crypto and digital currencies right now the way generations before looked at credit cards – with nothing but disbelief and trepidation. But there will come a time when cards are replaced by instant payment and there needs to be a roadmap in place to help these customers understand the new normal.
How do you see the utility bills payment sector in relationship with the MSB space, post-pandemic?
Nelson: Everyone has bills to pay. You’re talking about 40 billion payments a year based on households around the world and that’s just looking at basic utility services. Anywhere between 20% to 30% of funds that are being sent by remittance are being used specifically for bill payment services. I think the question we have to ask is who’s going to pay for it? Is it the sender or the recipient? From PayKii’s perspective, we actually play both sides of it. Our platform is a global digital platform with one API integration and we offer both domestic and cross border services in over 30 countries. But cross border bill payment is really our bread and butter. Because people want the ability to pay bills directly back home, either for control, security or peace of mind. There are three key challenges with bill paying in a cross-border context. The first one is awareness as most individuals do not know they can pay bills back in their home countries for themselves or for their loved ones. The second is commitment, which involves getting them to understand what is the value or bill payment by creating a more holistic view of managing the customer. The third challenge is regulatory fees but it’s slightly different from the regulatory challenge you’ll face in the money transfer world due to how different countries regulate bill payments.
Do you consider that the new adoption of technologies like blockchain may play a major role in both regions or are they typically regional focused?
Walter: I think they are going to be very regionally focused. If you look at Africa, there are certain countries where there’s been significant adoption of crypto often relating to their existing currency. In Nigeria, for example, example, there’s been 80% adoption. So it’s not about boiling the ocean here we have to really focus on corridors and where there’s a supporting regulatory framework. As far as blockchain is concerned, I think blockchain means so many different things to so many people and it’s often misinterpreted or misrepresented. For me the application of blockchain is not just about the value of an asset or funds; it is a complete 3D picture that you can build around a transaction.
Do you think that Cryptocurrencies can be a solution to solve settlement problems for intra-Africa cross-border remittances?
Stone: At Eversend we’re already using stable coins to move value across different studios based in different African countries. You really need to move values pretty quickly, especially if you aren’t going to have tens of millions tucked away in capital across different markets. We’re doing this internally though, so the customer doesn’t actually see anything to do with crypto or stable coins but we use them amongst ourselves to make sure that everything balances out in different countries. For these solutions to work we need modern systems as with old systems you’d have to use US transfer, which would take 3 to 5 days. That means we can reduce the amount of capital we need just by using this almost instant system of stable coins. I see the future of remittances going into stable coins, at least in the short term.
Customer loyalty can be a challenge in the remittance space. What new products and technologies should MSB’s consider to strengthen their relationship with the end-user?
Nelson: I’m not an expert in remittance space and I certainly can’t predict the future but what I will say is that where before you tended to have a lot of companies that were specifically focused on remittance, over the past few years fintechs have broadened everyone’s horizons. They have forced everyone to look at remittances in a slightly different way. So, the question is, what can dedicated remittance companies do to retain customers when the dynamics of the industry have changed so much and so rapidly? I think the first thing is to look at the customer holistically and ask how you can best manage that person’s financial health. Beyond helping them send money home, what else of value can you provide to help them manage their financial health?
Stone: We’re doing a lot of things internally around retention and one of those things comes back to little everyday payments. The idea is that to keep people coming back you give them the ability to quickly buy something like phone credit and bundle that in with a lot of other relevant financial services, giving them more value and more reason to stay. We also have a measure we call the “care factor” and this is essentially a measurement of the virility of our app through people telling their friends about Eversend. We try to ensure that every user is going to lead us to at least one other new user and this is done with the incentive of referral rewards so the inviter and the invitee both get a small amount of money when the invited person becomes a paying customer. We’re essentially giving our marketing budget directly to our consumers and it seems to be working.
We also know that bank de-risking is a major challenge for many businesses. What technological innovations exist to overcome this challenge?
Walter: You can’t really overcome the challenge of having a physical connection to a bank. No tech can achieve that. However, regulatory technology can de-risk your relationship with the bank by staying ahead of the game. Unfortunately, you’re never going to avoid de-risking until money businesses fully get behind PSD2, which for some reason they still seem quite reluctant to do. All you can really do is manage your volumes and cultivate banking relationships specific to the vertical markets you are going to operate in. Because certain banks will have the systems in place to focus on a certain corridor, whereas other general banks may not. The major challenge for banks is that they are typically rendered moribund by legacy systems – old IBM apps that they developed in the 70’s and 80’s that are still running some of their core business applications. So for them to adopt newer technology is very difficult because it doesn’t fit into their workflow. That’s where fintechs comes into the equation because we know what we’re doing with new technology. The problem, however, is that fintechs lack the trust of established banks and this is something that’s going to require greater collaboration. Until that happens, de-risking is just going to be a matter of doubling up, or tripling up, or spending a lot more effort in managing your relationships. But certainly being ahead of the game in terms of compliance and KYC gives you a big advantage.
We have seen the rise of everything from blockchain to instant payments and mobile money in recent years. But what changes are we going to experience in the next five or ten years?
Stone: What I see as the future of remittances and finance as a whole is some kind of central location from which somebody can get all of their financial service needs met. So if you’re sitting in a cafe in Paris and have to pay your grandmother’s electricity bill in Uganda, the platform that you use should be the same platform from which you pay your Amazon or Netflix bill. What we are seeing is that amalgamation of financial services I think that’s really going to be the future – all in one, borderless apps. You want to be able to offer more than just remittances, you want an app somebody can use to trade stocks and crypto and send money back home. The more touchpoints, the better!
Do you think the current regulatory frameworks welcome or stifle new technological innovations in the industry?
Nelson: Part of the issue is that regulators have bigger fish to fry and they rarely make the rules of the game clear, so to speak. So it poses a challenge for us depending on where the client is located and operating. Bill paying is a small ticket item that I think most regulators just haven’t thought about, which leaves us specifically in a rare position where we can move ahead but we have to do so cautiously as we can never be 100% sure if or when the regulators will suddenly decide we’re a concern. When you want to make sure you are crossing your t’s and dotting your i’s, it’s hard when that’s not the primary focus of the regulators themselves. But I guess that allows wiggle room for playing around, testing boundaries and seeing what works. And as always, working with consultants who are very good in the remittance space can make sure you understand the stadium that you’re playing in, if not the game itself.
Walter: It honestly depends on where you are as there’s no such thing as consistency. You’ve all no doubt seen the recent events in China and the impact that has had on the price of crypto. The biggest impact on the market in terms of innovation is going to be the introduction of central bank digital currencies because in a way that’s going to really legitimise their use. Then of course you have open banking, which is definitely going to happen on a wider scale. I think the advent of digital currencies will push open banking. They go hand in hand, after all.
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Video: Perspectives on Digital ID – What the future may look like (eKYC and AML)
Continuing our recent discussions exploring some of the challenges and opportunities being faced by the remittance sector in these uncertain times, RemitONE hosted a webinar on the 24th of June 2021 regarding the ever-shifting perspectives on digital ID in the remittance sector, particularly in light of the COVID-19 pandemic. The panel was made up of experts from both RemitONE and our friends and partners in other global companies. In case you missed the webinar, here is a summary of the key insights.
Webinar moderator:
Saiful Alom, Head of R&D at RemitONE
Panellists:
- Richard Spink, Sales Director of Channel and Partnerships, GBG
- Osama Al Rahma, Head of Business Development, Emirates Bank
- Reynell Badoe, Payments Manager, Stanbic Bank
Why is digital ID important?
Osama Al Rahma: Digital ID is of course incredibly important through its use of KYC (know your customer) and the ability to identify the customer. In fact, it’s largely through the use of digital ID that we have been able to protect the financial regime from crime on a wide scale. The shift towards digital already started pre-pandemic and has only increased in recent months. No longer are banks encouraging the use of traditional brick and mortar branches. Instead, they are relying heavily on their digital offerings, which by default means that the ability to identify the genuine user of such services is more effective. We’re also seeing a shift to digital with eKYC (electronic know your customer) on a much larger scale when it comes to remittances. This will allow us access to machine learning with Artificial Intelligence, which is incredibly powerful when integrated with real-time streaming. Using this technology, we’ll be able to conduct more diligent processes within transaction screening and monitor the behaviour of certain users in greater depth. For the sake of financial security on the compliance side, this is incredibly important.
Richard Spink: At the end of the day, digital ID reduces compliance costs so it’s always going to be important from a purely financial perspective. However, there is no widely regarded standard for digital ID so far, at least as far as MTOs are concerned. What MTOs have generally been using as the core tenants of their ID is proof of identity and proof of address, which are attributes that can be used by financial services around the world. Of course, a standard would be ideal, but as there are so many different regulations in different countries, this is unlikely to happen anytime soon. As an aside, it’s worth noting that while Revolut has a lot of customers, they’re not profiting very well and the reason they’re not making enough money is supposedly due to the cost of compliance. Digital ID will help businesses globally and save money on the process of knowing who their customers are and the cost of compliance as a result. And I think the technology to do this already exists.
Saiful Alom: It would be ideal if there was a way to digitally identify a person, ensuring that they have met all KYC and AML needs. However, due to the world we live in, there are a lot of complications to work around.
What is the adoption of digital ID like in your respective markets and has COVID accelerated your options?
Reynell Badoe: From a Ghanaian perspective, if you look at the stats, the number of people with access to the internet is proportional to the number of people with access to so-called big data. Having access to the internet means giving up your information and as a result, you also have access to financial services and remittances. It’s a worthwhile trade-off for most. However, there are 1.2 billion people in Africa, and only a handful have access to the internet. While COVID certainly things and meant there had to be a quick adoption of digital money transfer channels from traditional methods, we still have a lot of catching up to do digitally. With regards to how? The pandemic has meant more people have had to use data platforms and open mobile wallets, creating a digital shift of necessity, so the groundwork has already been laid.
Have there been any challenges in terms of Trust Private Security?
Osama Al Rahma: Trust, privacy and security are the three main pillars when it comes to finance and that will never change. The challenge is that by the time that technology evolves, different unforeseen issues tend to arise. For example, using AI for facial recognition might be incredibly convenient when it comes to opening your phone with a glance but the negative consequence is that it is another means for fraud to occur. When we speak up about this, we need validity.
Saiful Alom: In terms of Trust Privacy Security, this is a concern for all of us as consumers – particularly seeing as online services have been adopted at such a large consumer scale since lockdown began. Trust has increased in these online services and so consumers use them more regularly. However, there are many issues to consider and chief among them is privacy. Because your data is a lot more venerable now and consumers transferring money online may question how secure their transactions really are, and if it can be hacked or breached.
Is digital ID a potential solution or a problem to identity fraud?
Richard Spink: If you’re lending money, then I think that there is certainly high risk. It’s a different process to opening up a bank account or sending money on behalf of someone else. The key thing is to ensure you are actually sending that money to the correct person and thankfully, there are more reliable tools that are able to detect these issues now. It comes down to the organisation’s fraud screening processes. The question is how much information are you able to acquire and what does that fraud screening process look like? The standard answer is that there is no silver bullet – there isn’t one organisation that has everything available to run the process at zero risk. However, in the same way, there is always risk in a face-to-face transaction too. As we all know. “Good friction” is necessary for both scenarios. What has changed in the digital process is that it is now acceptable to present an identity, run that process with a mobile phone and check for duplicates. In the future, things will get even more secure with the use of biometric technology and face recognition, thumbprint recognition and the ability to check a chip on a passport. This last process is something we’ve started working with recently. In all, there is a lot more information that is available when trying to detect fraud these days, however, the same rule still applies: you need to decide what information you want to capture and make a decision on it.
The government has been known to over-regulate and stifle innovation. Do you think that we have the right balance when it comes to trust vs innovation?
Reynell Badoe: I think that the government has a lot of responsibility to provide the basic and necessary requirements and nothing more. On the issue of trust, we’ve seen leakages in the past – breaches of customer information from companies. So, on a consumer level, there is the issue of trust to contend with, as people are sceptical as to whether or not their information is safe. An example of this is free apps – technically they’re not “free” in the sense that you give up some aspects of your digital ID data in exchange for access to that app. I’d say the question is: can the information be used against me in the future? In terms of innovation, there’s a need for better services – we need a safer place to operate without having to worry about any of these concerns and challenges. There needs to be a fine balance between regulation and opening up certain aspects of digital ID.
Where does the government sit within this space in terms of digital ID?
Osama Al Rahma: When it comes to the government, it comes down to the level of leadership of that nation and their perspective on digital transformation. They then need to lay down the military frameworks, the standards and the security aspects in order to develop a secure environment. It’s been said that once you introduce digital financial services then it’s not a case of if you will encounter fraudsters but when. There is a lot of truth to this adage, as I have seen myself when we launched a remittance app and immediately fraud occurring on a massive scale. The reality is that if you are not well-enough equipped in different aspects, you will likely encounter problems. One of those aspects is having clear risk mitigation policies, and the second is to use advanced technology to identify such risks. A third aspect, meanwhile, is knowledge and awareness. Most issues I’ve seen actually involve the consumer allowing the phishing to happen due to his lack of knowledge on how scams can occur. It’s all about protecting your consumers.
What advice would you give to MTOs and banks who are thinking of adopting digital ID within their processes?
Richard Spink: My advice would be to keep things simple and understand the regulation before you talk to a business like us. Everyone will give you different advice on regulation. In my world, I need to understand the regulation of the market the jurisdiction is operating in. For example, if your business is registered in Germany, the German financial regulation is very specific on how want that ID verification process to run. In fact, they want it done via video. But this isn’t the case for the whole of the EU. So, although the EU is one trading block, in theory, in practice there are different processes required depending on where your business is regulated. I’d also recommend considering what you need to do to confirm that someone is who they say they are. In my experience, finding proof of address is the hardest process and yet it’s required by most regulators. My experience in the last ten years shows that the proof of address data is large in quantity however there is still nowhere near enough to satisfy the global coverage.
What are the critical questions you will ask an ID verification provider?
Osama Al Rahma: Before asking the questions, develop your own strategy and consider what you will want in the near future, including your offerings, products and other engagements with the consumers as this will dictate the type of provider you want to consider. On one hand, look at the flexibility of upscaling the technology, as you want someone to partner with as opposed to a short-term solution that will leave you stuck with a legacy system that will hinder your ability to enhance your offerings in the future. On the other, look at the ability of the service provider – have they got a system that is dynamic enough to cope with the constantly shifting regulatory requirements?
What do you think this space will look like in two to five years?
Reynell Badoe: At this point, it’s all speculation, especially with the speed at which technology is advancing. For example, things that one would have expected to happen in a decade could happen as soon as next year. At this point, there’s already a lot of personal information online both knowingly or unknowingly. Now, people are less concerned about giving away their data and are more concerned about where it’s going. For example, if there’s a new online financial institution that people are gravitating towards then I, as a customer, would want to find out a bit more before parting with my information. This has led to the use of federated IDs where I can sign in to a website using my existing Google account because I would naturally be more comfortable leaving my limited information with Google as opposed to this relatively unknown third party. I personally expect to see a lot more use of federated IDs in the future.
How do you see the rate of digital adoption in sending and receiving markets, in terms of duration, post-pandemic and pre-pandemic?
Osama Al Rahma: During the pandemic, I think the main shift was that consumers released how digital engagement was beneficial to them. Why do you think China was able to so effectively control COVID-19? It’s because of their AI and biometrics. They were able to use this to track and trace the people who had been in touch with an infected person and find out which areas they were prominent in. The only positive, economic growth in 2020, in comparison to other developed countries, was China and one of the primary reasons was this biometric ability. This is already being applied elsewhere today – going through an airport completely contactless, for example. With regards to the future, the adoption of these new methods should be reviewed seriously by all financial companies. It might be a slow burn but always look at how they will impact your business model and how you will be able to use them to your advantage in the future.
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