Open Banking and Payment Innovation
One of the latest trends to hit the money transfer industry in the UK and Europe is Open Banking. Based on the use of Application Programming Interface (API) technology – and initiated by PSD2 in 2016, the Open Banking movement allows banks to make their customers’ financial data shareable and enables third parties to access real-time financial information.
As a trend considered by many to be revolutionary in the money transfer industry, it’s important to analyse the advantages of account-to-account payments; the opportunities Open Banking can hold for banks, third parties and consumers; and finally, the challenges facing the use of Open Banking technology.
Fundamentals of Open Banking
Put simply, Open Banking is a framework that allows institutions to share financial data safely and securely with consumers and third-parties. Using APIs, licensed third-parties can gather financial information, integrate this data or even push payments directly from customers’ bank accounts to third party systems including mobile apps and online portals
Account Information Service Providers (AISPs) can fetch read-only financial data which allows them to compile customers’ financial information, make recommendations, provide intuitive services and more. In comparison, Payment Initiation Service Providers (PISPs) can make direct bank transfers – or ‘Account to Account’ (A2A) payments – from bank accounts.
Key features
With recent surveys suggesting that over 86% of financial institutions are aiming to use open APIs to enable Open Banking in the near future [1], it’s no surprise that Open Banking offers a range of benefits to third-parties and consumers alike. For example, A2A payments have notable improvements to UX, including the removal of conversion barriers; these improvements result in a more efficient transaction journey, allowing consumers to make payments through their own banking app without the need for inputting card data.
Direct payments initiated by PISPs also have a higher transaction acceptance rate (95% in comparison to up to 14% failure rate for card transactions [2].
However, aside from these beneficial features, a key advantage of Open Banking for all involved is the reduced fees in comparison to card payments. A2A payments don’t involve transaction fees or operational costs, saving users up to 80% on fees in comparison to card payments [3].
Another benefit offered by Open Banking that seemed to excel in its rollout is that of security. With a significant increase in card fraud as a result of the rise in digital payments and remittances in recent years, the need for a more secure transaction experience was overdue. With Open Banking, this risk appears to have been reduced, with PSD2 and the UK’s Payment Services Regulations (PSRs) keeping Open Banking services in check.
Finally, similar to what we’ve seen with the rise of technology instruments such as E-wallets and Super Apps, Open Banking and Open-Source technology facilitate a wide range of new opportunities across not only the payments industry, but other verticals too. The collaboration between established banks, Fintech companies, third parties and software providers (such as RemitONE) encourages the integration of services to create new and improved propositions [4].
With new open-source technology and fintech enablers like RemitONE, consumers can have more control over their apps, and offer more services to their customers. Making use of RemitONE’s established Open Banking partners also allows Fintech start-ups, money transfer operators (MTOs) and banks to utilise new technologies and offer their customers a safer and better experience.
Considerations
Open Banking has certainly gained traction over recent years and the benefits seem to be providing innovative solutions for common issues in the payments and remittance industries. However, as with all developments, it’s important to analyse the challenges presented by the introduction of new technology for both the clients and consumers. For example, the main challenge facing Open Banking is security, particularly as A2A payments are more often being utilised by smaller Fintech companies [5].
Final Reflections
It’s clear to see that Open Banking plays host to a range of key benefits for banks, third parties and consumers alike in all industries. It can offer lower fees and enhanced user experience, paving the way for collaboration between traditional and modern players in the payments and remittance industries.
However, the challenge of implementing new technology continues to be a essential part of the digital revolution. In the coming years, it will undoubtably be of interest to see how the Open Banking framework, PSD2 and Open-Source technology will continue to evolve, and where it will take the Payments industry.
References
[1] https://www.finextra.com/blogposting/20777/four-ways-open-banking-can-benefit-financial-institutions
[2] https://recurly.com/blog/benchmarking-minimizing-credit-card-transaction-decline-rates/
[3] https://truelayer.com/openbanking/open-banking-payments-vs-other-payment-methods/
[4] https://www.openbanking.org.uk/wp-content/uploads/Open-Banking-A-Consumer-Perspective.pdf
[5] https://www.comparethecloud.net/articles/opportunities-challenges-open-banking/
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Video: The Rise of Digital Remittances – How to capitalise?
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 future of digital remittances.
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 Arundel, Chief Evangelist & Co-Founder of Currencycloud
- Assad Alawneh, Owner at Alawneh Exchange
- Luke Flomo, CRO of Vyne Payments
- Walter D’Cruz, CEO of Moneo Solutions
We have seen a drastic change in the payments industry in the last five to six years, especially in E-payments or wallet payments. In your view, what have been the main developments in the industry. Do you think these developments are to stay? And is the growth of digital payments sustainable post-COVID.
Richard: There’s a lot to unpack in that question. And you’re right, there’s been a load of change over the last five or six years in the payments industry. Firstly, we’ve seen huge advances in core technology. And, in particular, customer trust in this technology. We’ve seen, especially in the MTO and the remittance space, a rapid rise in digital-first MTOs, which has driven more established MTOs to respond by rapidly introducing some conditional initiation funding capabilities. Nearly a third of incumbent remittance companies have now become digital. And the pandemic has obviously accelerated the kind of these digital trends.
I think, on the technology side, more and more of these products and services delivered by technology and accessible by API’s so the menu that remittance companies can choose from has just gotten bigger and easier to read. In terms of mobile banking, as well, mobile apps and mobile banking downloads are going up 50% year on year, and people are preferring this digital method.
Another area where I’ve seen a huge change in development is customer expectation. There was already a rise pre-pandemic as a digital company, but you add on the impact of COVID and this heightened digital expectation and we’ve seen a huge shift to digital products. And it’s driven these traditionally non-digital companies to think much more digitally. So, there’s this new age of competition.
What new technological advances are now being utilized in the digital remittance industry, particularly in your area or space?
Assad: I’d like to talk about the main elements of the technology, which is considered API. I think that the development of the API’s makes significant changes to the industry and to how we connect with partners – we connect with other services and provide the services in a different way. API’s are now a key driver for FinTech and for the payments industry. Without the API’s we wouldn’t be able to provide digital payments or even mobile applications, or payments through the mobile application, sending and receiving the remittances through the API or through the mobile application.
I think as well, this will increase the volume of the transaction because I think FinTech companies, now, their main development they have is the API because they can connect to any other service providers in the industry. Through the API’s, we can even improve the customer journey with the service. So, we have been able to provide payments through them with the application because we are able to connect to payments because if you want to provide a mobile application, for example, to send my resume by application, you need a way to pay for the transaction through your bank account or via the debit card. So again, this is connected through the API’s, and this technology as well.
Where does open banking fit into all of this? How does it work? What are the benefits for money transfer businesses?
Luke: The UK open banking framework that’s been created has helped in many respects, and gained access to payments infrastructure. But I think one of the key problems is the fact that the banks today aren’t incentivized to open up their back end in terms of all that information and data, because they’ve spent years and years capturing it. And now essentially, PSD two, as stipulated, they need to now open up all that data for free. And I think one of the big points that we need to work with these organizations from a FinTech perspective across the board is how do we help them to monetize that data to a certain extent, and how do we then consume it in a really accessible way, that means that we can reduce friction for a consumer.
I think one interesting fact is that about 80% of the UK population have now got a smartphone and about 78% of adults are now digitally banked, and 14 million of them have got a digital-only bank account. So, there’s a real demand for this as a utilization of payment infrastructure. Many of you may be aware that open banking hit the 5 million consumer mark. So, consumers are utilizing this type of technology on a day-to-day basis. It’s now up to us in our costs across the globe to start allowing consumers to utilize this payment method in all the different use cases and scenarios.
How can employers leverage technology to expand their networks without necessarily having a presence in that country?
Richard: I think, firstly, if you’re looking at expanding your network, one way to do that is expanding the number of kinds of pay-out corridors or countries you can send money to, which ultimately expands your user base within the country that you’re working in. The second way you can do that is maybe looking at collections as well as payments, for example, we talked earlier about the current rise of e-payments or e-wallets. And thirdly, partnering with companies who can use technology to leverage their licenses and the compliance and their regulation, which enables you to expand on a global basis without necessarily having a presence in the country.
How can crypto and blockchain assist NGOs in facilitating cross border payments?
Walter: Firstly, I sat and watched the first panel today, the first session on digitalization and, you know, a lot of that crossed over to what we’ve been talking about today, which leads me to believe that actually it’s not about crypto and blockchain assisting MTOs, it’s about how they’re going to migrate into the digital world. And blockchain is just one technology platform that will support that move.
However, in today’s world, the cost of compliance is getting higher and higher. And that’s where I see crypto coming into it, in terms of reducing that cost of compliance. In actual fact, the cost of sending money or moving value is going to get cheaper and cheaper, yet the cost of compliance is going up. So that’s where blockchain can assist, it’s not so much in the transfer of value, because it’s a currency right? The value is whatever the market perceives to be. What can you include in that blockchain that will enable better compliance, better transparency, and therefore fewer people or humans touching it, therefore driving your costs up?
Oussama: I think one of the issues with Bitcoin was people are not using it as all it was built for – as a currency. Now it’s obviously more of an investment. And that’s where we see the volatility of it and of course, what’s happened. If crypto is pegged to a fiat currency, then absolutely. But then we get into the question of regulation; is there enough regulation? Is there going to be more regulation? Is it going to help people bypass some sanctions?
What are the critical questions when evaluating a payments vendor gateway provider that we should be asking?
Luke: It really depends on what you’re trying to achieve. In essence, I think most organizations are looking to acquire new consumers, retain existing consumers and make life as simple and as easy as possible for both the consumer and themselves in terms of working practices and UX and UI. So, I think the key thing you should be thinking about or contemplating when looking at a payment gateway and acquiring a vendor or an alternative payment method is where am I operating? Where are my consumers based? And can that organization support me in those specific territories, either with local payment knowledge, insights, data, as well as connectivity? If you’re operating outside of the UK, there are other alternative payment methods to the likes of credit cards, debit cards, and e-wallets, and there are specifically wallets and payment methods in certain territories.
So we know that regulation is one of the biggest challenges in the industry, what new tech is out there to overcome these challenges? Specifically focusing on fraud as being one of the biggest challenges.
Assad: I think for the regulator how do you identify the customer, and if you go back to the rational way where the customer will come to you and present his ID and you can see him in front of you face-to-face, and then you can know this customer is the one dealing with you. And when it comes to digital payments and online payments you have to identify the customer digitally. In order to identify your customer online and have the data available, you can verify the ID verification, you can do it online.
Now, we can do video conferencing, and you can do even voice authentication in order to identify your customer. There are also companies providing the service – again, without the API’s, you will not be able to do this online verification and online customer KYC. Regarding fraud detection, I know they’ve been using big data optimized to analyze the fraud as well. I think artificial intelligence as well as is being used to identify fraud just from legitimate transactions for legitimate customers as well. As I said the video conference can take a live selfie in order to make sure that this person is the same person. So, there’s also technology now helping us to identify customers and again, to be compliant with the regulators and to avoid fraud as well.
Oussama: In terms of regulation and transaction marginal what’s interesting is it depends on which region you’re in. But what also looks quite interesting are the steps that each region has been taking or will have not been taking. As an example, in Jordan, they don’t request any particular reports, they just request if there have been any suspicious activities. Whereas on the other hand, I know that the FCA in the UK do request a specific report and it has to be at those specific intervals. Furthermore, in Dubai, they’re coming up with lots of new regulations, but they again asked for specific reports in specific formats.
Additionally, with AusTrack, the regulatory body for Australia that we’ve built into our system, now produces the AusTrack report and posts it straight to their website. I think it’s quite good because they’ve made those APIs available, so they’re trying to make compliance a little bit more attainable. And again, getting that information directly from the MTO themselves by being able to post that. I just think it’s a much neater way and it opened up the market for people because if they’re abiding by these regulations, that’s fine. So that was what was supposed to happen with PSD two, everyone’s supposed to abide by PSD two, and the banking was supposed to open up for everyone, which unfortunately didn’t happen.
What does the future look like? Will cryptocurrencies replace major hard currencies in international payments?
Walter: I don’t know what the future looks like. No, it changes every moment. But certainly, in certain corridors, crypto or digital currencies will replace hard currencies for international payments or remittances. Whether it be central bank-issued digital currencies, or the likes of Bitcoin, or some specific tethered or stable coin, a token program, most definitely.
But, I think it’s inevitable. It’s going digital and you can’t stop that. I think the big challenge is it isn’t going to replace hard cash in the High Street, no chance. Certainly not in the developing countries where cash is still a big, big way of paying and exchanging goods and services. That’s not going to replace cash, but certainly in developed nations like Europe and the UK.
Richard: I think the underlying technology is really interesting. I also think it depends on time horizons. In the last few years, maybe crypto has been a solution looking for a problem. I think it’s about time now that certain cryptocurrencies or blockchain technology go more mainstream. And you’re going to see more applications for it. And I think there are definitely solutions out there that can use a blockchain-driven solution, whatever crypto or stable coin that might be.
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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Preguntas y respuestas con expertos de la industria: Selim Mohamdi
Vea la última serie de preguntas y respuestas con experto de la industria, Selim Mohamdi, Gerente de Desarrollo de Negocios, RemitONE.
En nuestra entrevista, Selim explora la relación entre la aceptación de los pagos móviles y lo que esto significa para las transferencias de dinero en efectivo, así como el papel de las criptomonedas y blockchain en el proceso de remesas.
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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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