IPR Training: AML and Compliance for Money Service Businesses Key Takeaways
In a rapidly evolving financial landscape, combating money laundering (AML) and ensuring compliance has become highly essential for money service businesses (MSBs). Two weeks ago, we hosted our second Innovation in Payments and Remittances (IPR) training session, focusing on AML and compliance strategies tailored to the unique needs of MSBs.
In this article, we’ll delve deeper into the key highlights discussed during the session for you to gain key insights from.
If you couldn’t attend the live sessions, don’t worry as you can still sign up at a reduced rate and access them on-demand.
It’s a great opportunity to enhance your expertise, earn CPD points, and secure a certification. You can register online here: https://payments2023.ipr-events.com/register
Now let’s dive right in and explore some of the key takeaways from the 2-day sessions.
1. Differentiating Terrorist Financing and Money Laundering: Recognising Patterns
Distinguishing between Terrorist Financing and Money laundering is vital in developing targeted prevention strategies. The training session highlighted that while both activities involve illicit financial transactions, they often exhibit different characteristics. Terrorist financing can be sourced through legitimate funding, unlike money laundering where its origin is from criminal activities and financial crime.
Money laundering frequently involves larger amounts aimed at concealing the illegal origins of funds whilst Terrorist financing comprises of small, discrete transactions intended to avoid suspicion.
Noticing these unusual large or small transactions can be a key indicator of potential terrorist financing, allowing businesses to act quickly and prevent the flow of funds to harmful causes.
Furthermore, MSBs should set up appropriate monitoring mechanisms and transaction thresholds to better identify and report suspicious activities that align with the specific patterns of these crimes. This way MSBs can reduce the likelihood of criminal activity being carried out through their business.
2. Structured KYC Procedures: Gateway to prevent Money Laundering risks
As the starting point for any business relationship, a structured and rigorous KYC process enables MSBs to verify the identity of their customers, assess the legitimacy of their transactions, and detect potential red flags. By obtaining and verifying relevant information such as customer identification, source of funds, and purpose of transactions, MSBs can create a comprehensive customer profile that aids in identifying suspicious activities. Effective KYC practices also enable MSBs to establish a strong foundation for ongoing due diligence and monitoring.
Recognising that every MSB operates within a distinct operational context, it’s crucial to design risk assessments that address the specific needs and characteristics of each business. This approach ensures that potential vulnerabilities are identified and addressed effectively. By analysing factors such as transaction volume, customer profiles, geographic scope, and business relationships, MSBs can develop risk assessment frameworks that accurately reflect their exposure to money laundering and other financial crimes.
RemitONE’s Compliance Manager™ (COM) features a set of compliance features to ensure enhanced detection of fraudulent money. Some of the features include:
- Linked Transaction Detection: will detect multiple transactions sent by the same remitter to different beneficiaries or multiple remitters to the same beneficiary. This will help you notice any suspicious activity you need to alert authorities of immediately.
- NameMatch™: Eliminating the need for manual cross-referencing against international sanction lists, our technology streamlines the process, ensuring greater efficiency. The system cross-checks against multiple sanction lists and accommodates the addition of custom lists. Moreover, seamless integration with external Compliance List Services, such as Reuters’ WorldCheck, Experian, and GBG, widens the spectrum of available lists, encompassing PEP lists as well.
- Dynamic risk scoring: Conduct personalised risk assessments utilising assigned scores ranging from 0 to 100 for Remitters and Beneficiaries. This score continually adjusts in response to a range of variables, encompassing factors like source country, nationality, individual versus corporate affiliations, and name screening outcomes.
If you’re interested to integrate COM™ into your system contact us at sales@remitone.com.
3. A Compliance Officer/MLRO is crucial
Delving deeper, Ibrahim emphasised the fundamental role of a Compliance Officer or Money Laundering Reporting Officer (MLRO) in combatting money laundering. There are four essential components he advised to keep in mind when selecting the right candidate:
- Qualifications: The compliance officer must possess a strong foundation, supported by relevant qualifications and certifications. Their background should reflect a deep understanding of AML practices to effectively help them navigate the complexities of compliance. They should have a minimum of one year of practical experience in the field and hold credentials related to AML/compliance, endorsed by international standard organisations.
- Championing Independence: Independence is key as the compliance officer controls AML policies, risk assessment, internal controls, and training. Furthermore, their decision-making process should remain uninfluenced by other team members, as external interference can cloud their perspective and make them compromise compliance.
- Dedication Demanded: the compliance officer should be a dedicated, full-time member of the team to ensure a high level of monitoring. While certain operational aspects can be outsourced, the oversight and management of these functions, particularly in jurisdictions like the UK, remain firmly the responsibility of the compliance officer.
Sign up for IPR Training Sessions – Offering CPD Points and Certification
We have more exciting upcoming events you can sign up for. Discover the full schedule of events and reserve your spot now at: https://www.ipr-events.com/.
Remember, tickets are limited and allocated on a first-come, first-served basis. To ensure your participation please secure your seats early.
Don’t miss out on these exclusive opportunities to expand your knowledge, connect with industry experts, and stay at the forefront of cutting-edge developments.
We look forward to seeing you in our IPR training sessions!
Trust Payments Partners With Innovation in Payments and Remittances (IPR)
We’re thrilled to announce that Trust Payments, a leading global payments company, will be a Platinum Sponsor for the upcoming Innovation in Payments and Remittances (IPR) Global 2023 event. Explore the exclusive article below directly from Trust Payments, where they explain how to take your remittance business to new heights and unlock its full potential.
Unlocking Potential: How Collaborating With a PSD Agent Boosts Your Remittance Business
Remittance, the transfer of funds by foreign workers to their home countries, plays a critical role in the global economy. The World Bank reported that in 2022 alone, the money remittance business grew by an estimated 5% to $626 billion, making it a bigger financial inflow than foreign direct investment.
And as the world turns increasingly digital, the online money remittance sector is anticipated to grow exponentially, thus reflecting the significant role it plays in global economies. However, operating a successful money remittance business comes with its fair share of challenges, including regulatory compliance, transaction costs, and building customer trust.
In this article, we will explore how collaborating with a PSD (Payment Services Directive) agent can significantly enhance your remittance business and how to leverage their expertise and expand your business reach.
Key challenges of remittance businesses
Despite its global importance, the remittance business grapples with several challenges. Regulatory compliance is at the forefront, as companies must adhere to a complex web of local and international regulations. These laws aim to combat illicit activities like money laundering, but complying with them can be costly and time-consuming.
Furthermore, high transaction costs, driven by fees for currency conversion, transfer processing, and other service charges, can deter potential users. Lastly, gaining customer trust is critical. The international remittance business involves moving people’s hard-earned money across borders, a process fraught with risk and anxiety for customers. Maintaining transactional security while offering a smooth user experience is thus vital to business remittance services.
What is a PSD agent?
The Payment Services Directive (PSD) is a European Union regulation that oversees payment services in the internal market. A PSD agent, authorised by the Financial Conduct Authority (FCA), is a business that provides financial services on behalf of another company under the PSD legal framework.
PSD agents are under the authority of a licensed e-money or payment institution that is fully responsible for their actions.
Joining Forces for Collaboration & Business Growth
For remittance companies, collaborating with an FCA PSD agent can be a game-changer, providing distinct advantages. PSD agents are skilled navigators of the complex legal requirements, licenses, and anti-money laundering regulations. Their understanding of compliance minimises regulatory risks, freeing remittance companies to focus on their core operations.
Moreover, PSDs can help mitigate fraud and ensure transactional security. They employ sophisticated technologies and algorithms to detect unusual patterns and thwart potential fraudulent activities. Their expertise in this realm significantly bolsters the credibility of the remittance business, winning customer trust.
Here are three additional benefits businesses can gain from partnering with a PSD agent:
1. Increased technological capabilities
PSD agents bring to the table robust technological solutions. They provide secure, reliable payment platforms that integrate seamlessly with existing systems, utilising APIs for flexibility and interoperability.
In addition, they offer data analytics capabilities, supplying crucial insights into customer behaviour and market trends. This valuable information can inform strategic decisions, supporting the growth and competitiveness of the remittance business.
2. Streamlined transaction monitoring, reporting, and customer support
Collaborating with a PSD agent brings efficiencies in transaction monitoring and reporting. They possess refined mechanisms for tracking and documenting transactions, ensuring all activities are compliant and traceable. Additionally, they offer comprehensive customer support services, enhancing the customer experience and fostering loyalty.
PSD agents have sophisticated systems for tracking transactions and generating comprehensive reports that comply with regulatory standards.
They document every transaction in detail, ensuring traceability, and present this data in user-friendly, accessible formats. This organised, precise reporting enables remittance businesses to have clear oversight of their operations, which in turn helps them identify patterns, track growth, monitor compliance, and make data-driven decisions.
3. A broader network
A partnership with a PSD agent can significantly expand the reach and network of your remittance business. With their international affiliations, PSD agents can help extend your services to new markets, augmenting your customer base. This geographical expansion boosts revenue potential and reinforces your standing in the global remittance arena.
How to Get Started with a PSD Agent
Collaborating with a PSD agent can significantly boost your remittance business by addressing the challenges faced in the industry, such as regulatory compliance, transaction costs, and customer trust.
By leveraging a PSD agent’s expertise, technological capabilities, and network, you can navigate complex legal requirements, mitigate fraud, streamline operations, and expand your business reach.
At Trust Payments, we have over 20 years of experience supporting financial services institutions with fast settlements and high approval rates. Our overnight settlement service makes remittances faster. We offer instant pay-in and pay-out functionality and a seamless payment experience for your customers.
If you’re ready to take your remittance business to new heights and unlock its full potential, we encourage you to contact our expert team today!
Video | Finding the Right Licence for Your Money Service Business
In the second instalment of our informative “How to Start Series,” Ibrahim takes a deep dive into the crucial topic of licences and their significance when establishing your very own money transfer business. Obtaining the suitable licence is significant, as it legitimises your venture, safeguards your customers, and builds trust within the market.
In this video, Ibrahim explains the various licences applicable to money transfer businesses, shedding light on their distinct features and requirements. Understanding the types of licences available is vital to ensuring a smooth and legally compliant operation in this industry.
Ready to dive deeper into launching your own MSB?
Contact our expert consulting team at RemitONE today and organise a free 30-minute consultation. Let us guide you towards success and help you get your money service business up and running as fast as possible. Schedule a free consultation with our experts:
Understanding the basics of Remittances: World Of Payments IPR Training – Key Takeaways
Last month, we successfully launched our first IPR training session, led by our esteemed payments expert, Ibrahim Muhammed. With a remarkable track record of over 20 years in the industry, Ibrahim brought unparalleled expertise and insights to the program.
Designed specifically to enhance participants’ knowledge and skillset in the money transfer industry, our series of trainings aim to educate and propel individuals forward in their professional journey.
Our first training kicked off with World of Payments, an introduction to the fundamentals of the key concepts and dynamics of the remittance industry. If you couldn’t attend the live sessions, don’t worry as you can still sign up at a reduced rate and access the on-demand session.
It’s a great opportunity to enhance your expertise, earn CPD points, and secure a certification. You can register online here: https://payments2023.ipr-events.com/register
Now let’s dive right in and explore some of the key takeaways from the 2-day online sessions.
- The Surging Importance of Remittances for Economic Growth
The impact of remittances on economic growth in developing nations cannot be understated. In 2022, countries received transfers worth over $700 billion from diasporas working abroad. These funds serve as a critical source of income for families, bolstering their purchasing power, healthcare access, and educational opportunities.
Interestingly, remittances have surpassed other categories, including foreign direct investments, in their contribution to economic growth. This substantial inflow has prompted global jurisdictions to impose stricter sanctions, emphasizing the need for formal remittance channels that promote transparency and traceability of funds.
- Understanding the Remittance Ecosystem Players
A crucial aspect of achieving success in the payments industry is understanding the diverse roles of participants within the remittance ecosystem. From financial institutions to technology providers, regulators to consumers, each stakeholder plays a vital role in facilitating the seamless transfer of funds across borders. By comprehending the complexities of this ecosystem, MSBs can identify potential partnerships and collaborations that align with their business goals, fostering growth and expansion.
- Forming Effective Partnerships with Aligned Goals
Collaborating with the right organisations can unlock new opportunities, expand your customer base, and enhance service offerings. By joining forces with compatible organisations, you can benefit from each other’s strengths and drive mutual growth. Actively building and nurturing these partnerships can help enable long-term success.
- Rise of Prepaid Cards and Wallets
Ibrahim shed light on the growing prominence of prepaid cards and digital wallets as convenient and sustainable payment options. With their ease of use, accessibility, and flexibility, these solutions offer a viable alternative to traditional banking systems. MSBs can leverage prepaid cards and wallets to tap into new customer segments, enhance financial inclusion, and provide seamless cross-border transactions.
IPR Training Sessions – Offering CPD Points and Certification
We have more exciting upcoming events you can sign up for. Discover the full schedule of events and reserve your spot now at: https://www.ipr-events.com/.
Remember, tickets are limited and allocated on a first-come, first-served basis. To ensure your participation please secure your seats early.
Don’t miss out on these exclusive opportunities to expand your knowledge, connect with industry experts, and stay at the forefront of cutting-edge developments.
We look forward to seeing you in our IPR training sessions!
RemitONE Winners of the Remtech Innovation Remittance Solution Award at GFRID | United Nations Summit in Kenya, Africa!
We are delighted to announce that RemitONE has secured the prestigious Innovation Remittance Solution Award at the RemTECH Awards 2023 – GFRID | United Nations Summit in Kenya. This incredible achievement underscores our commitment to revolutionising the payments and remittance industry through cutting-edge solutions.
The RemTECH Awards, organised by CrossTech and held as part of the GFRID | United Nations Summit in Kenya, served as a platform to honour remarkable achievements and advancements in the fintech industry. Over three days, industry professionals from around the globe congregated to celebrate and engage in an enlightening conference.
Our success in the Innovation Remittance Solution category can be attributed to the groundbreaking tools we have developed. Notably, our Multi-Online Remittance Manager™ and Multi-Mobile Remittance Manager™ have played a pivotal role in advancing financial inclusion. These game-changing solutions bridge the gap between the banked and unbanked populations, providing greater accessibility and convenience for money transfers through our digital innovations.
We had the privilege of being assessed by esteemed judges who acknowledged the significance of our innovation. Leon Isaacs, judge and CEO of DMA Global, presented us with the award and praised our approach. He emphasised, “RemitONE has seen a problem and looked at various solutions and put them together in a way that truly works for the people who use their services or could utilise their services, which I think is innovative in many ways.”
Representing RemitONE at the event, our Managing Director of Africa, Ababacar Seck, accepted the award and delivered an inspiring acceptance speech. He reiterated our commitment to empowering clients, including banks, money transfer operators (MTOs), startups, and central banks, with innovative solutions tailored to their specific needs.
This award serves as a testament to our relentless pursuit of innovation and excellence. At RemitONE, we remain dedicated to shaping the future of the payments and remittance industry and improving the lives of migrants and their families worldwide.
To learn more about our award-winning Money Transfer Software reach out to us at sales@remitone.com.
How to Start a Money Transfer Business: Collaboration and Key Partnerships
Authored by Ibrahim Muhammad, Senior Consultant at RemitONE
Ibrahim Muhammad is a highly passionate payments professional with over 20 years of experience in Money Transfers and provides specialized consultancy to start-ups and incumbents.
So far we have covered various topics as part of our ‘How to Start a Money Transfer Business series’, including information on the basics of getting started with a Money Service Business (MSB), followed by the licensing options available to new MSBs with a particular focus on the UK. We have also covered a critical area of managing AML and Compliance for MSBs. In this article, we are covering yet another important topic: creating and maintaining collaborations with key stakeholders and partners in order to establish and grow your MSB.
What Partnerships Will I Need?
Establishing and maintaining the correct type of partnership is at the core of any MSB, particularly those offering cross-border remittances. There are several types of partnerships that an MSB needs to consider, as specified below:
Banks
Depending on the business model, MSBs might need to maintain bank accounts both domestically and internationally to facilitate the secure collection of funds from their customers and enable the transfer of funds. For international transfer of funds, MSBs can establish relationships with banks in the receiving countries for the remitters to send funds to their beneficiaries, primarily in the form of credit to bank accounts.
Today, the majority of banks offer APIs wherein the MSBs can directly and securely facilitate the instant transfer of funds to the relevant beneficiary accounts. Banks play a significant role in the fund flow and are the heart of the entire payment ecosystem. MSBs can opt to establish a relationship with a single bank in each of the receiving countries in order to facilitate the transfer of funds either to the same bank account or any other third-party bank account within the same jurisdiction. MSBs need to maintain sufficient funds upfront with each of the banks they establish relationships with to ensure the timely processing of funds to the beneficiaries’ accounts.
Money Transfer Network Operators
For new MSBs, it might be quite challenging to establish a bank account easily, mainly due to de-risking factors as well as liquidity constraints. Therefore, a quicker route is to collaborate with an established Money Transfer Network Operator that can facilitate cross-border payments to a wider network.
The advantage MSBs can have by establishing relationships with such operators is that they will have a single hub to facilitate pay-outs to different countries. This solution also empowers their remitters to send funds instantly and securely to their beneficiaries in the form of credit to bank accounts, cash collection or even mobile wallets in the receiving countries (subject to business and regulatory arrangements in place).
Payment Networks
MSBs that accept payments via cards or bank transfers from their customers (remitters) need to also maintain relationships with payment gateways and payment acquirers. As the trend is moving more towards cashless payments, it is important that MSBs maintain this type of relationship with payment networks. The majority of payment gateway providers and acquirers offer several types of pay-in channels for the remitters of the MSBs, such as VISA, Mastercard, and Paypal, and even facilitate direct bank transfers on the sending side.
Mobile Money Network Operators
Mobile network operators can help MSBs to reach customers in remote or rural areas who may not have access to traditional banking services. MSBs can partner with relevant operators to offer mobile money services. Several players in Africa such as M-PESA in Kenya have been pioneers in offering these mobile money services.
Retail Networks
Retail shops and other types of outlets are also important partners in the remittance ecosystem. They usually collaborate with money transfer operators, mobile money network operators or banks to become cash-in our cash-out channels. MSBs can also consider establishing relationships with retail networks that have extensive physical brick-and-mortar branch presence in the receiving countries.
Key questions to consider
MSBs need to ensure that they consider a range of factors before partnering with any of the aforementioned entities. Below are some of the key questions that an MSB needs to consider for it to decide on the right partnership:
- Does the partner fit into the business goals and model of the MSB?
- Are they regulated/registered in the relevant markets?
- Are they trustworthy, reputed, and transparent in pricing?
- Do they offer competitive rates and commissions?
- Will the partnership bring in more revenue, and increase the customer base of the MSB?
Overall, partnerships are a critical component for the growth and success of the MSBs. By partnering with the right entities, MSBs can expand their global reach, and improve their product types and services offered while also meeting the needs of their customers in various jurisdictions.
What next?
Thank you for taking the time to engage with our ‘How to Start a Money Transfer Business’ series – we hope you have found the content insightful!
If you’re looking to launch a Money Service Business or grow your existing business, RemitONE offers a comprehensive solution with our RemitONE Launchpad service. This bespoke service is designed to guide you through regulatory hurdles, support you with compliance requirements, and much more.
Our expert team will provide you with tailored advice on your unique requirements and objectives. We’re dedicated to helping you land, expand and flourish, and have a proven track record of successfully supporting all our clients at every stage of the process.
So, if you’re looking for a reliable and experienced partner to provide end-to-end support, please don’t hesitate to get in touch with us.
Tap into our experts and schedule a free consultation to get started.
Video: Saving the Crucial Role of Agents and Banks in the Remittance Industry
Brought to you by RemitONE, the Innovation in Payments and Remittances (IPR) Global Hybrid event took place on 19-20 October 2022 and included a series of fantastic discussions.
Wallets have been on the rise in recent years which has forced banks to embrace technological advancements to keep up with the pace of digital innovations in the remittance industry. In this panel, we uncover the driving forces behind this change and the possible impact it may have on banks, agents, and the overall money transfer landscape in the coming years.
Moderator:
- Ababacar Seck, Managing Director – Africa, RemitONE
Our panellists include:
- Sharon Gibson, CEO, JMMB Money Transfer
- Leon Isaacs, Founder and CEO, DMA Global
- George Boateng, COO, Unity Link
Why are pay-out transactions shifting to wallets?
There’s been an increase in the popularity of pay-out transactions through wallets, due to their accessibility and simplicity. This upward trend is particularly prominent in Asia and Africa. For example, in Ghana, the mobile money market reached $121.8 Billion in 2022 and is expected to grow to $590.7 Billion by 2028. George believes the reason behind this is attributed to factors such as convenience, as wallets are more easily within reach than banks, and overall save time and effort.
Leon also reinforces, wallets are often preferable as they’re easy to use which means people don’t require additional assistance. Other drivers are, the senders have more options, people have become more digitally savvy and most notably, it’s cheaper. Another key benefit of wallets is their increased security due to tokenization, which is a unique identification number attached to any personal information such as account numbers.
However, it’s not the same in every region. Sharon shares that in Jamaica there’s only one institute that offers mobile wallets, but that could change very soon. The recent launch of CBDC can possibly encourage more institutions to embrace digital wallets.
How can banks and traditional agents cope in the digital era?
Leon states in many cases it’s rare for agents or banks to be solely a remittance business. While they may have their core purpose, they should adapt and diversify their services to progress ahead in the competitive market. Sharon suggests that banks can collaborate with more agents to offer their products and services and satisfy client needs, however, there need to be adequate technology capabilities in place for it to be a success.
Data shows that customers prefer the physical contact of agents as they instil trust and provide clear guidance when a problem occurs, as opposed to communicating with a bot. A study even found that 64% of customers commented that they could not solve a problem when using mobile apps to transfer money. Overall, agents play a crucial role in building customer trust and loyalty especially as a large proportion of transactions are still carried out in stores and not through digital means, which proves they still hold a strong position.
There are different considerations for the send and receiving end for agents. The pandemic did accelerate a surge in people adopting digital payments and transactions which resulted in a lesser need for people to visit agents, and it’s likely that this will continue. As for the pay-out side, there is potential for agents to educate customers as online accessibility varies in countries where people are still hesitant about online banking and money transfers – this creates a good chance for agents to bridge the gap by acting as the intermediaries between clients and digital payments. Customers already trust these agents, which makes it more probable for them to adopt changes with the agents’ help.
Leveraging technology is another technique agents can utilise to enhance efficiency and strengthen their role further. For instance, many people have formed personal relationships with agents but sometimes lack financial literacy. In such cases, agents can take advantage of innovations such as card readers to increase customer security and reinforce the trust clients have in them. This can solidify the bond between the agent and client as well.
MNOs are taking over transactions led by banks, is this healthy? What does this mean for the future of final inclusion?
There is no denying that competition drives innovation and MNOs gaining the lead has pressured banks to also step up their game to progress ahead. MNOs often educate the underbanked on how to use their products, an area where banks are lacking. There’s also greater flexibility with MNOs, as people can instantly access their digital funds from the comfort of their homes without the need for documentation and physical visits to the bank, helping them to save precious time.
MNOs particularly boast a good distribution of agents across both send and pay-out. However, their products excel in locations where there is a vast digital presence (although they still have a huge potential to increase penetration of financial services, which will continue to encourage financial inclusion). In locations where there is good digital infrastructure, the need for agents to pay out cash is also lessened, this creates a window of opportunity for them to diversify their products and services. One example is M-pesa in Africa, where digital wallets are the primary method of payment. As a result, customers rarely use physical cash, which suggests that people will only need to visit a branch for a specific need unrelated to money transfers or cash-outs.
The changing face of remittance clients requires a new approach, how can MTOs keep on top of the needs of clients and how will this affect the business model?
In contrast to the past, migrants are more skilled individuals and therefore less reliant on agents, demonstrating increased digital literacy. As a result, the power balance has shifted to the customers, with the internet providing easy access for them to quickly switch to other companies if they are unsatisfied with the service.
Clients also tend to focus more on convenience, such as banking being available everywhere at any time and more demand for receiving immediate results. This places a heavy burden on banks – they often have to increase their costs to expand their workforce and enhance their operations more robustly. However, with the increasing popularity of social media, email, live chat and phone, it becomes challenging for the banks to meet the demand – this can lead to dissatisfaction, complaints and negative reviews, overall damaging the brand’s reputation.
To minimise this problem, Sharon proposes a collaborative relationship between banks and agents, to exchange knowledge and expertise and gain a thorough understanding of the client’s needs. Leon explains that companies need to rethink their strategies to maintain a close connection with clients whilst keeping pace with their changing needs. However, a positive takeaway is that customers are benefiting from having their needs finally met and the industry continues to thrive.
Can technology help agents preserve their role?
Whilst technology can be costly, it can be a useful tool to streamline operations more effectively. One way is gathering accurate data in a more interactive way instead of relying on traditional surveys. Social media platforms like Twitter polls can help analyse consumer behaviour, identifying factors which motivate them to pick specific agents over others.
As the rapid surge of digitalisation continues, more businesses are having to adapt. At RemitONE, we play a pivotal role in helping banks shift to the online realm. Our software empowers agents to provide customers with user-friendly portals whilst providing an array of options for them to choose from, such as airtime top-ups, prepaid card services and more. By utilising our industry-leading software, you can increase your transaction rates whilst maintaining top-notch security through our AML and KYC checks. This results in a seamless process from send to pay-out. You can also gain access to our global network of clients and partners that we have built over decades for you to access right away, saving you time, cost and headache.
Interested in powering up your business? Get in touch with our experts to provide your customers with a secure, convenient, and exceptional money-transfer experience.
Tap into our experts and schedule a free consultation.
References
https://www.imarcgroup.com/ghana-mobile-money-market
https://www.westernunion.com/blog/en/leery-of-how-digital-wallets-work-let-us-break-it-down-for-you/
Video: Cryptocurrency as a Payment Method – The new growth potential for money service businesses
In our latest IPR Webinar, our expert partners from BP Ventures LLC joined RemitONE to explore the use of Cryptocurrency as a payment method in the money transfer industry, and how using the USDC can benefit money service businesses as they shift to a more digital way of transacting.
Webinar moderator:
- Aamer Abedi, CMO, RemitONE
Panellists:
- Jeffrey Phaneuf, Director, BP Ventures LLC
- Anthony Barker, Director, BP Ventures LLC
- Arif Saleem, CTO, RemitONE
Time Stamps
00:00 Introductions
14:24 What is the next big thing in the ecosystem for remittances?
17:29 How have you seen payment methods change over the years?
19:37 What is USDC? How does it compare to other USD-denominated stable coins?
23:29 Why use the USDC stable coin as a payment mechanism?
28:27 What is the fear that MTOs may have using USDC? How do we address this?
31:31 How can we address the bank account issue?
34:45 What are the benefits of using USDC as a payment mechanism for the individual users?
37:54 What’s different from paying with a stable coin instead of traditional methods?
40:19 What is the cost to the MTOs?
43:10 How do we take advantage of the Moneygram USDC opportunity?
44:03 Risk profile of USDC vs. cash or card?
44:56 How can USDC as a payment mechanism decrease Chargeback rates & Fraud?
45:47 Margins are compressing for MSB’s, how does using USDC help increase revenues?
47:14 Are users going to use stable coins & can we settle it?
53:05 Next steps, how can we implement USDC as a payment mechanism leveraging RemitONE?
59:48 What procedures and policies need to be in place to enable USDC?
Please let us define the terms blockchain cryptocurrency stable coin and token.
Anthony: So, Blockchain is a word that you’ve probably heard in the news everywhere. It comes from Bitcoin which has a technological system where that verifies blocks of transactions (the blocks come every 10 minutes) and computers all over the world. Right now, in Bitcoin, there are over 5000 computers, called validators, that validate the transactions.
An example of a cryptocurrency is Bitcoin. Cryptocurrencies typically use blockchains. So, the ones you might have heard of might be Ripple, Stellar, Bitcoin and Ethereum. The difference between a stable coin and a token is that a stable coin is typically tied to the value of a currency. So, the one we’re talking about today is called USDC.
USDC is a stable coin issued by Circle Corporation, which is a US-regulated financial institution. It’s audited by third-party auditors. So, these are stable coins, they’re tied one to one. And in theory, you should be able to cash out $1 of USC for one US dollar.
Why Stellar? What, in your opinion, distinguishes Stellar from other blockchains?
Anthony: Stellar and Ripple would have been built up, really to focus on the international cross-border payments. At that point, Ripple was closed source; it was owned by one corporation and was really focused on promoting its XRP token, which was issued mostly to employees, founders and investors in Ripple. Then I compared it to stellar, all of the software was open-source from the beginning, and that seemed to me to be a better platform to build on where you can add additional value.
The volatility in the cryptocurrency markets, as evidenced by the fluctuating Bitcoin value graphs, can make a money service business, which obviously wants prices to be as stable as possible, extremely nervous. How does cryptocurrency as a payment method solution, that BP Ventures and RemitONE are proposing here, address this concern of volatility?
Anthony: Bitcoin and Ethereum are mostly used on these offshore contract-for-difference trading platforms, which are highly leveraged. So people are individual traders are trading at it at a 10 to one ratio or a 100 to one ratio, so you can have 100 bitcoins controlled with your one Bitcoin. So when the market collapses it has a tendency of going up very quickly and down very quickly now. But stable coins, because they’re tied to the US dollar or Euros, they are much better for remittance companies.
If you look at the bailouts that occurred in 2008, when major companies like Barclays and other major institutions went bankrupt, they had to have government intervention to save the whole ecosystem. If you look at cryptocurrency, to give them some benefit of the doubt, it’s still running. There are still transactions clearing, there’s still settlement, and the USSC dollar is still worth $1. So it is growing, and its funds are based on US Treasuries. So they’re not sitting their money in some risky offshore thing. All of their funds are in short-termed US Treasuries. So USDC is safe. With other Cryptos, there are different levels of risk.
What is the next big thing in the ecosystem for remittances?
Jeffrey: I think given the recent announcement of Moneygram’s cooperation with Stellar to offer USDC the cash in cash out, we believe that digital crypto blockchain powered payments is potentially the next big thing in the ecosystem. We’ve been involved in Stellar blockchain for a number of years. I think the fact that MoneyGram has confirmed their entry into this space, certainly confirms that using USDC as a payment mechanism on Stellar blockchain has some merits.
Arif: One of the big problems in remittances is the friction at different levels when you’re talking about international transfers. And any new technology, that can reduce that friction and reduce the cost associated with that friction, is definitely going to become more important as time goes along, especially if regulatory and other concerns can be addressed and delayed. So in that sense, it does appear as though one-to-one-backed stable coins offer a very friction-free international transfer.
USDC – what is it and how does it compare to other US-denominated stable coins like USDT and even CBDCs that aren’t mentioned?
Anthony: There are two main issuers in the United States as regulated institutions, one’s called Paxful, and the other one is called Circle. Its price equals one dollar. It hasn’t really fluctuated from that, in the past four years. It’s managed by something called the Circle Consortium, which is a group of companies that oversee the financial standards for stable coins and ensure there’s transparency around the one-to-one backing. That means for one USDC created there’s $1 held in reserves typically in a bank, or in US Treasuries. Now, USDC is available on multiple blockchains. And this is where it gets a little bit confusing for remittance companies. So there’s multiple blockchains around that are all competing, they’re vying to get adoption by users.
Why should the MSBs the money service businesses use the USDC stable coin as a payment mechanism?
Jeffrey: We believe that there are several compelling reasons why USDC as a payment mechanism is interesting for MSBs. One is that it’s fast, meaning that funds are received within 3 to 5 seconds, versus a payment that you would receive, let’s say, by a card processor that sends us the funds up to 15 seconds after the transaction was performed on the long side. So that’s one reason why we’re advocating USDC as a payment mechanism.
The second reason is that we think it’s better regarding decreasing both fraud and chargebacks. USDC payments are irreversible. And so again, my experience and depending on the MSB, we had significant chargebacks, we had fraud related to customers that would come back and were requesting a chargeback, which ultimately, and in some cases meant that we were out of the money at the end of the day. So this is where the USDC payment as a payment mechanism avoids this.
What are some of the fears the MTOs have the MSBs have about using USDC? And how do we address these fears?
Jeffrey: I think there are probably two particular items that obviously that come to mind. One is regulatory concerns when using cryptocurrency or stable coins. And that basically would be contingent on what jurisdiction the MSB is in and do they require any specific or additional licensing. The second item I would say is in the banking sphere. And MSBs normally are always susceptible to banking relations just in normal times. So certainly, bank relations are precious and MSBs may fear an impact if they offer USDC as a payment mechanism.
From an MSB perspective, as long as they meet the regulatory criteria, all they have to do is sign up with an entity like Circle to gain access to USDC and have this BP Ventures payment gateway enabled for their end-users?
Jeffrey: That’s right. To be able to assist those that have issues getting a USD Circle account, BP Ventures can assist at that stage. But for larger MSBs, yes, we would certainly recommend that they would just open the USD Circle accounts. And the fact that we’re going to have this integration directly into RemitONE means that there’s no setup fee, they’re off and running. And it should be really a compelling new payment mechanism to be able to offer MSBs customers.
What’s different from paying with a stable coin versus these traditional methods today?
Arif: So essentially, the payment process remains the same for the end-user. So, the same flow would happen, when using the BP Ventures gateway for collecting the USDC, it’s just that instead of providing your card details, you would instead be providing the wallet numbers from which the funds would be paid and the wallet to whom the funds are going to go. So, in that sense, the payment process is very similar, there’s not really a great deal of difference in terms of flexibility. One of the things about USDC tokens is that you don’t have to be in the US to use them. You don’t have to have a USD account to use USDC tokens – you could be in any country as long as it’s legal.
And what does using USDC mean, in terms of increasing revenues for our MSBs?
Jeffrey: With USDC, you get the funds immediately, you reduce your charge chargeback and fraud rates, meaning that you’re not at a loss in those areas. So, your revenues basically should go up due to the fact that the fee proposed is either for free or after 10,000. USDC is lower than cards means that your revenues again should go up, because hopefully the transaction is going to be more profitable.
And finally, are users going to use stable coins?
Anthony: So with BP, we have a certain approach that basically we think that an MSB should roll it out step by step. We’re pushing the acceptance of the USDC as the first step for MSBs. The second one is to actually as an MSB sell the USTC. So, customers can come online and actually buy the USDC and you can mark it up. Now the third step that MSBs may do in the future is actually settled with correspondence using USDC. We think that that’s going to happen in the future. We tried it previously, with tempo in the Philippines, we had it working to the Philippines, Nigeria, and Brazil. That worked. It’s just not quite there at the critical mass yet. So that’s why we’re really recommending it as a risk-based approach.
Jeffrey: We think there are a lot of compelling reasons to try it. And we’re going to try to make it from a technical side, as easy as possible as seamless as possible to incentivize people to use it, and to make the financial reason to use it as well, a compelling reason. So, we’re optimistic that it is a very viable way to make a payment.
For more information or to request a free consultation with one of our money transfer specialists, please email marketing@remitone.com
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