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.

What next?

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Video: Remittances in the Pandemic Age – Obstacles and Opportunities

Continuing our recent spate of discussions exploring some of the challenges being faced by the remittance sector in the wake of the COVID-19 pandemic, RemitONE hosted a webinar on the 23rd June 2021 regarding the obstacles and opportunities of remittances in the pandemic age. The panel was made up of experts from both RemitONE and our friends and partners in other global companies. In case you missed the webinar, here is a summary of the key insights.

Webinar moderator:

Aamer Abedi, CMO, RemitONE

Panellists:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RemitONE partners with Evantagesoft to launch innovative remittance services to Pakistanis at home and abroad

RemitONE, the leading end-to-end money transfer solutions provider, announces its partnership with Evantagesoft Private Limited, Pakistan’s principal financial technology solution provider.

This partnership launches innovative remittance services in the region and establishes a remittance aggregator using the collaboration of both teams.

“We are pleased to offer an innovative end-to-end remittance service in the country using the RemitONE platform. As remittances are on a rise in the country, there is a need to streamline all the complexities that have been faced by the stakeholders involved in the process. We foresee a vital role that RemitONE will play in making this happen through its highly successful and compliant money transfer platform. It will enable the ability to send money, airtime, banks transfer, and mobile transfers from a network of more than 100+ money transfer operators across the globe as well as to speeds up the transfer process so beneficiaries receive their funds faster” – says Evantagesoft CEO, Arshad Quayyum.

“At RemitONE, we never shy away from innovation and improving the user journey, so it was only right that we partnered with a fintech company that shares our values and vision. We have already prospered from the partnership and we look forward to continuing working with Evantagesoft, to bring established and streamlined remittance services to Pakistan.” – Aamer Abedi, CMO, RemitONE.

For more information about the partnership please contact marketing@remitone.com

About Evantagesoft

Evantagesoft is a FinTech enablement company, providing financial platforms ranging from Digital Banking, Remittance, Mobile Money, Mobile Wallet and various Financial Solutions. Through its proprietary technology, the company is helping in establishing payment railroad with innovative strategies in different economies. Evantagesoft specializes and has diversified technology experience in both product development & custom applications, and implemented quality innovative business solutions for various industry verticals including Financial Services, Telecom, Mass Transit, Entertainment, Real Estate and Sports. For more information, visit: www.evantagesoft.com

About RemitONE

RemitONE is the leading provider of end-to-end money transfer software solutions and related consulting services for banks, money transfer operators (MTOs) and fintech start-ups worldwide. Organisations of all sizes use the award-winning RemitONE platform to run their entire remittance operation with ease and efficiency. Organisations also take advantage of RemitONE Consulting services to grow their business. These services include money service business licence application, bank account setup and access to business connections. For more information, please email marketing@remitone.com

Remittances: Getting digital-ready for post-pandemic recovery

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

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

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

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

Nadeem

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

Richard

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

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

David

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

Sidharth

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

Richard

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

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

How does risk play into digitising money transfer?

Nadeem

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

David

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

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

Sidharth

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

Richard

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

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

Nadeem

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

David

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

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

Sidharth

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

Richard

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

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

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

Nadeem

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

David

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

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

Sidharth

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

David

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

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

Richard

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

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

Nadeem

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

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

Nadeem

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

David

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

Sidharth

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

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

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

David

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

Nadeem

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

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

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

R1 Webinar: The Future of Remittances

Has COVID catalysed the digital transformation of the remittance industry?

COVID-19 has fundamentally changed a lot this year. In the case of the money transfer industry, the immediate impact has not been a positive one. The World Bank has predicted that global remittances are set to decline by 20% as a direct result of the pandemic. Something needs to be done and it’s the young and nimble money transfer operators (MTOs) that are best equipped to create a new digital path in a world where physical contact is restricted.

The evidence of digital transformation

Digital transformation has been slowly changing the remittance sector for decades now and COVID has hastened that transformation. The fact is, where digital was once an option it’s now a necessity and that has completely changed the game for all banking sectors.

According to recent RemitONE transaction data trends, there has been a major acceleration of digital channel use during the pandemic. The use of physical agents, meanwhile, is down, which might seem insignificant but points to a drastic overall shift in consumer habit.

Throughout history, it’s the sectors that have been able to adapt to the times that have weathered the storms and retained their relevance. With the recession caused by COVID-19 taking a toll on the ability to send money home and remittance flows projected to decline even further by 14% in 2021, an easier, cheaper remittance solution has never been more vital.

Digital money transfer

Studies have proven that remittance not only helps to alleviate poverty in developing countries but can also lead to an increase in domestic spending. If there’s one thing we need right now it’s for people to be spending more. Digital-first MTOs are the ones ready to offer the most robust and accessible easy-to-use remittance services with fair and reliable exchange rates.

Of course, this is not a change that can happen overnight. Historically speaking, migrant communities would rely on physical money transfer services and these services have, as a result, become pillars of the community. Indeed, it’s estimated that the recipients of many international remittances are unbanked, which might go some way towards explaining why 90% of remittances currently begin and end with cash.

Does this mean it’s up to remittance operators to prove their worth and make themselves more accessible? Because digital operators that use the latest remittance software are not faster and only more affordable due to the obvious lack of overheads but have been proven to be better at evaluating customer experience and security.

Digital acceleration beyond the pandemic

It’s no exaggeration to suggest that COVID-19 changed the world overnight, but the impact on the migrant community has been under-reported. For months now, foreign travel has been almost impossible, which means migrant families have been unable to visit their families. What’s more, the pandemic has amplified the pressures migrants face in striking a balance between supporting themselves and supporting their families back home. For these families, digitally native money transfer operators will play a crucial role in redefining remittance and money transfer for a post-COVID world.

There are several benefits of digital transformation for the remittance sector for both legacy and upstart operators. Through the use of money transfer software on desktop computers and via smartphone apps, it’s never been easier and faster for customers to keep a reliable track of their remittance journey. The pandemic might have offered an opportunity for operators to use this software to foster trust and build new customer bases that keep communities connected and able to hold each other up.

This is proven by the growth of M-Pesa as the predominant payment method in Kenya. This is a digital solution that manifested because a traditional banking ecosystem was simply not accessible for a majority of Kenyans. That digital alternative quickly became the preferred option when users realised how powerful, easy, and convenient it was. Ultimately, it’s a safer, faster, and easier service that should help shoulder some of the stress that migrant families currently find themselves under.

Conclusion

Consumer preference has been shifting away from cash for years now and with many cash-based remittance solutions forced to close due to COVID-19, the future is definitely in digital. What money transfer operators and other fintech organisations need to understand is that this represents an incredible opportunity for them to prove their worth.

Borders might be closed but migrant workers still depend on remittance and if they’re going to make that switch from their old inflexible and outdated conventional means to more accessible solutions, they might need a bit of a gentle push.

To discuss your online offering with our team of experts please contact marketing@remitone.com

RemitONE Proud Platinum Sponsor of IMTC World 2020

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

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

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

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

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

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

About RemitONE

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