Video: The International Money Transfer Market – Challenges, trends and opportunities

Continuing our recent discussions exploring the evolution of the remittance sector, RemitONE hosted their IPR EMEA event on 2-3 March 2022. The 90-minute panel session centred around the enormous rate of change over the last few years in the money transfer market, resulting in new technology, higher customer expectations and endless opportunities for MTOs.

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

Webinar moderator:

• Aamer Abedi, RemitONE

Panellists:

• Elizabeth Rossiello, CEO & Founder of AZA Finance
• Hasan Fardan Al Fardan, CEO at Al Fardan Exchange
• Leon Isaacs, CEO & Founder of DMA Global
• Alex Orechoff, Financial Services Vertical Growth at Worldpay from FIS

The World Bank reported remittance flows grew by 7% in 21, and declined by only 1.7% in 2020. This is despite the severe global recession caused by COVID-19. What factors do you think have contributed to this growth?

Leon: The first point in the question is about the resilience of remittances. The people who are sending remittances need to send money and to support them both with consumption and investment needs. And that need doesn’t just disappear. In fact, it probably increased during COVID times, as families back home, found it even harder. So it really meant that people who were sending money were even more committed to finding ways to do it.

One of the key things is the changing ways in which money was able to move. So the shift to digital has clearly had quite an impact. And now every company that makes any pronouncement on remittances, is always talking about their digital strategy, how that’s making a change in what they’re doing. And I think this focus has really helped to actually bring more some more people to the market.

Hasan: I very much echo and agree with a lot of the sentiments obviously, you know, the market that we predominantly serve is the second-largest market in the world. And obviously, the organisations that had a higher degree of digital preparedness, I know people talk about transformation, it’s a big buzzword. But ultimately, it needs to translate to some degree of digital preparedness – companies that were definitely much better prepared, and benefited from drastically converting traditional cash business into a digital business.

The biggest risk with a sector is the lack of regulatory oversight, and you don’t have the benefit of robust KYC, AML, and general compliance framework, so something that we’re definitely addressing at the industry level.

Alex: What Leon was mentioning as well, is that a lot of what has happened, thanks to COVID is that people have been introduced to new digital options, and that has forced companies to really innovate quickly and offer a lot of different avenues that people were not necessarily curious about before. It hasn’t been the best onboarding experience for people, because we’ve been just trying to get everything online for our partners as quickly as possible. And it’s not necessarily the most efficient.

Elizabeth: We process for over 28 of the largest remittance companies out of and across the African continent. And already six years ago, one of our fastest-growing operators launched a corridor into Nigeria, digital-only, and it was the fastest-growing product they’d ever launched. Before that, they were a cash-only agent collection remittance company, mainly out of North America.

So for me, I don’t know why we even use the word digital, because it’s what is remittance without digital at this point? And what are financial services without digital? So, you know, we don’t even think, to work with companies that don’t have a digital offering. It’s like saying, “what is digital banking?”, everything is digital these days. And we need to go beyond that. It’s not just how to get things digitised, it’s how to streamline operations and optimise in a world that’s so fast-moving.

From a technology solutions perspective, there is literally a 100% shift to digital. But is it still fair to say that there is still a lot of emphasis on cash? How do we reconcile the two comments here?

Elizabeth: Well, first of all, even cash networks use digital verification networks. I mean, nobody picks up cash with a paper slip anymore. Nobody goes really into the bank with a printed out terminal, you’re getting a mobile code on your phone, and then you’re going to the cash agent network. And the cash agent network is dominated by mobile treasury and float operations that are digitised. And if they’re not, they’re not going to work.

So I think the companies that aren’t thinking about that, from a user perspective, from a mobile perspective, are missing out. And again, it’s not just the app, it’s also the cash management, the operations, the treasury management.

What is it like in the UAE? Do you have some data to share about this channel cannibalisation from cash to digital? Is it supporting what others are saying?

Hasan: Now there’s a very large uptake and a very large migration from traditional cash to digital and the rate of growth is very aggressive. However, cash is still very much dominant, from numbers that I have seen still around 70-80% of the market is still operating on a cash basis and it’s not necessarily because of the lack of availability of digital solutions or digital touchpoints. As an organisation and I think as an industry as well we hear a lot of emphasis on digitally-driven financial inclusion, but digital inclusion doesn’t mean that you exclude the cash customers as well.

So the future is definitely digital and the migration is definitely much higher and it will continue to accelerate in the coming years, but I still see it being relevant in the medium term.

Aamer: So you have regulatory pressures, of course, for example in the UK and Europe there is a lot of pressure to go digital. So if you’re a cash-based business the regulator just makes the landscape really hard for you to operate. The companies that collect cash from the agent shops etc are dominated by a single player which doesn’t make it conducive for other participants to participate in a fair manner.

Based on the research data that you have access to, is there a market out there where the consumers are refusing to go digital and want to carry on using cash? I know there are a few regions that showed a lot of reluctance.

Leon: I think that it depends on which region of the world as to how fast it gets there and I also think it depends on your time horizon. Some parts of the world have been going 10 years or more using various digital services and the benefits to the users are normally so self-evident you do wonder why people don’t change, but there are a lot of cultural and historical factors.

Also, we have to remember a lot of people in the world have come from countries where they haven’t necessarily had significant amounts of money themselves and also, they haven’t trusted governments or local banks – they think governments may have influence over banks or banks have collapsed and so. There’s still a generation out there that has deep mistrust in anything that’s not physically in their hands or in somebody else’s.

When cash is still king for domestic payments, it is very difficult to then accelerate international payments to make a real dent. So what we need to do is continue to encourage domestic adoption and then the international will flow much more easily.

Alex: What it pulls down to are habits and trust. Anything you have to change a habit is a point of friction, it’s not something that you want to do or you feel comfortable doing, even if all the logic says that you should be doing this new habit. It’s just human nature. So if you’re using cash most of the time chances are you’re going to prefer to do cash in this transaction, and you have to have a really good catalyst to push you off that previous habit in preference.

Aamer: So basically, the panel of experts here feels that the statement ‘cash is king’ is an overstatement. The rate of transitioning that’s happening right now from cash to digital is happening at a pace we hadn’t imagined, it’s so rapid. One of the big three players, I think close to 30/35% of their total remittance volume is digital. Contrast this to 3 years ago when I was in one of the conferences, digital was over 5%. So over a period of three years, one of the big three players’ digital remittances have increased from 5 to 30% which is significant.

From a payments industry perspective, what do you think is coming next?

Alex: One thing is how do we make a frictionless experience for customers and how do we enable that? How do we enable people to grow quickly into the corridors that they want to be in? And how do you ensure that you can have a real-time treasury in the future? Because that’s obviously one of the biggest challenges that a lot of remittance companies have today.

We’ll definitely see greater use of cryptocurrency and CBDCs, but thankfully that’s a ‘future us’ problem – I would say that’s more of a 5/10-year pursuit, depending on where the various central banks are going, in which case we are going to have to think about what are the other things we offer to expand our breadth of products and to add more value to our various customers on the side of paying in but also on the side of paying out.

Can you just define ‘Super App’ and then we can discuss what we mean by this all-encompassing mobile app?

Aamer: There’s a new buzzword we’re hearing ‘Super Apps’. I was in Saudi Arabia a few months ago and I was using one of these taxi services like Uber, Kareem, Bolt. One of them was offering something interesting – they were offering on the app the ability for someone to order a nurse and they would send a nurse within 24 hours to do a Covid test or a PCR test etc. and this is all happening from that one ‘Super App’ if you will, and that’s the buzzword here in our industry.

A lot of these new companies from neighbouring verticals/peripheral industries have an established customer base and they are always thinking of generating revenue from new sources and remittance becomes the obvious choice. It’s a case of APIs. The API these days, from technology vendors especially, are so sophisticated that it’s just a case of plug-and-play. So if you have an existing app you can simply plug into RemitONE’s API and take advantage of the services they have through the API so there’s not much work to do.

Alex: That’s where you’ll see that as a key thing and it also happens to be because you trust the brand that is all-encompassing on that ‘Super App’ – we trust Kareem because it gets us from point A to B and therefore anyone they’re selecting is probably going to be trusted as a result. So that’s the big benefit of the ‘Super App’ that you mentioned there.

Elizabeth: We’ve had digital ‘Super App’s for over 8 years over the African continent and AZA launched the first ‘Super App’ which went from just mobile money wallets to offering health services, government payments and even some banking services. It even had a white label for banks to use as well and what we saw was a real success for services that were adjacent to its core business, but services that were too far off like the medical services ended up being replaced by companies focusing on that.

So for companies that are coming from the traditional brick and mortar space, they’re facing even more of a challenge for them to launch something so agile. What we also recommend for customers that want a white label is to work with companies that know what they’re doing like RemitONE. They have a great product it’s a white label product but maybe think about devoting a team to just doing that.

What obstacles or challenges do you see along the horizon what do MTOs or exchange houses in the money transfer space need to prepare for now?

Leon: One of the obstacles is if you’re not doing a fully digital solution now then either you’re too late or you need to do something immediately – you’re probably too late, but if you’re not doing anything that’s probably the biggest thing.

I think we also have big problems still with de-risking. I know we’ve probably been talking about this at conferences since at least 2012 if not before and I think it just rears its head in a different form.

It’s one thing of course to say that we want to go digital but actually doing the transition is a challenge in itself. As a very successful organisation in the Middle East, what are your thoughts on this? What are the typical challenges an MTO would face as it transitions?

Hasan: You have to start from the perspective of the UX and I echo some of the comments from my colleagues here, provided you can deliver a seamless customer journey generally that really is the basis of transitioning your customer base. I would say players have different degrees of success, of how well they can execute that. You are seeing an environment of offline margin, you are seeing an environment of increasing compliance costs so really only the highly compliant and highly competitive and highly agile businesses will continue to succeed.

Who do you see winning the ‘Super App’ versus Marketplace battle when it comes to accessing financial services?

Alex: It’s going to depend on what other aspects of the market we’re talking about, so there are going to be situations where the ‘Super App’ is going to be preferred – either because that is the place where there’s the brand and the trust. Or that that’s where they’re getting other services that they prefer to use because it’s all of them in one place. It’s easier to just accept that I’m going to have a higher price or that I trust I’m going to have a better price for my remittance through the ‘Super App’.

Elizabeth: I think the marketplace where you’re going online is not something that the younger segments are using so we’re not seeing that inherent in the youth population, so I think customer segments are pretty split depending on age and just digital nativeness.

Leon: I think it ultimately comes down to who owns the customer and if you’ve got the right product. I would tend to lead towards a ‘Super App’ having more to offer than a Marketplace by definition, unless you actually own the customer accessing that Marketplace then you’re going to be challenged.

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

IPR EMEA Online 2022: On-Demand

Don’t miss a moment. Catch up with all the previously aired content from Innovation in Payments & Remittances EMEA 2022.

The International Money Transfer Market: Challenges, trends and opportunities

Le marché international du transfert d’argent: défis, tendances et opportunités.

The Rise of Digital Remittances: How to capitalise?

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

Better Together: The cross-border remittance ecosystem

Mobile Payments and Remittances: Understanding the impact and the opportunities

Predictions for the Money Transfer Industry in 2022

Recent years have certainly reshaped the world of money transfers. The pandemic presented new challenges and the industry responded with innovative solutions. In 2020, we saw a great demand for mobile and online payments, driven by Covid-imposed restrictions worldwide – an astonishing 62% of banking customers considered switching from physical to digital platforms in 2020 alone [1]. It’s clear that this pace of change is showing no sign of stopping, so let’s explore the new trends and our predictions for 2022.

Cash v Digital: The Consequence of an Age-Old Question

An answer commonly sought in the money transfer space is whether the competition between cash and digital money transfer finally has a winner. Although it’s clear that cash isn’t going anywhere yet [2], digital remittances are continuing to rise, even outside the peak of the pandemic.

Customers and Money transfer Operators (MTOs) alike value convenience, security and cost-effectiveness; all of which can be easily offered by mobile and online payment systems. For example, eKYC, digital AML, payment gateway and other 3^rd party API solutions solve regulatory issues and give instant access to remitter, beneficiary and payment information. In addition, they also allow for changes to exchange rates while offering transparency to supply chain members and automating manual tasks.

As more MTOs enter the mobile money transfer space [3] – and the number of people with access to mobile devices increases [4] – digital money transfers will continue to evolve and thrive. This evolution has already made the role of technology solutions providers in this space mandatory. As a consequence, we predict we’ll be seeing these providers become a permanent part of the supply chain landscape.

Rise of Money Transfer Machines

Over the past 2 years, the money transfer industry has witnessed an array of technology features – that normally would have taken years to develop – reach the market within just a matter of months. Features such as Artificial Intelligence (AI), Big Data, Blockchain, Digital Wallets, Machine Learning (ML) and Open Banking are all entering the money transfer space. As a result, the role of technology solutions providers is becoming a mainstay in the landscape, and we can expect 2022 to be the year where these features are implemented.

The Uptake of Blockchain Technology

Most recently, there has been an increased use of blockchain-based technology for cross-border payments. The decentralised nature of blockchain not only speeds up transactions and reduces costs, but also has inherent security features which are tough to breach [5]. In addition, blockchain technology has an innate value that can eliminate the need for pre-funding in money transfers. Consequently, it can eliminate the biggest stumbling blocks for fintech start-ups in the money transfer space.

Open Banking

Another feature we’re currently seeing increasingly utilised in Europe is Open Banking. With the ability to connect banks, technical providers, aggregators and other 3^rd parties, Open Banking has allowed for a more seamless, transparent, secure and cost-effective experience for individuals.

Open Banking-powered money transfers appear to be improving the entire customer experience, reducing transaction costs and processing speeds in comparison to more traditional methods of payment. With the growing demand for improvement we’re currently seeing, it comes as no surprise that this is one trend we’re expecting to thrive.

Mobile Wallets

We’re also expecting that the definition of a mobile wallet will change in 2022. Whether it’s a send or receive market, the wallet functionality will add a host of services, including utility bill payments, airtime top-ups, micro-loans and wallet settlements. The digital wallet is en route to becoming a universal mobile bank account, through which all daily transactions of varying types will occur, regardless of where the individual is based.

What can we expect now?

Companies from neighbouring verticals such as hospitality, travel and telecoms are considering diversifying their product and service portfolios. Telcos, for example, are exploring ways to offer their own proprietary wallet with a variety of features, including money transfers, to customers. Taxi businesses are a further example of companies that are opening up remittance channels, so their drivers who are paid into wallets can send money directly from the wallet to their loved ones.

As a result, we can expect new alliances between previously disconnected verticals to take root. We can expect a rise in more Fintechs using a plug-and-play model to deliver a new breed of services involving money transfers. And finally, we can expect more aggregators to facilitate open-loop payments with instant delivery times.

To conclude, the main thing we’re predicting this year is diversification. From Open Banking and digital payment solutions to the coming together of firms from different verticals, we’re predicting more opportunities for Telcos, retail shops, MTOs, aggregators to deliver value to the customer through the digital wallet. The customer – the individual with a digital wallet – has never been in a better position to avail a variety of fully transparent services at cost-effective rates.

References

[1] https://newsroom.mastercard.com/eu/documents/mastercard-evolution-of-banking-2020-infographic/

[2] [3] https://www.remitone.com/ipr-report-2021/

[4] https://www.statista.com/statistics/330695/number-of-smartphone-users-worldwide/

[5] https://www.ibm.com/uk-en/topics/blockchain-security

What next?

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

Tap into our experts and schedule a free consultation.

Online Event: Innovation in Payments and Remittances 2022 – Europe, Middle East and Africa

Video: Trust vs Innovation – Finding the regulatory balance for a stronger Money Transfer sector

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 trust vs innovation in the money transfer sector and finding a strong regulatory balance. 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:

• Ibrahim Muhammad, Payments Consultant, RemitONE
• Kathy Tomasofsky, Executive Director, MSBA
• Farook Al-Jibouri, Founder and Executive Director, Cyber Code Technologies

The financial services sector has always been one of the most heavily regulated industries but what are the key compliance regulations and challenges that we commonly see across all jurisdictions?

Kathy Tomasofsky: I would say that one of the most important things we see across all jurisdictions is rules concerning your customer (KYC). They may vary in different areas in terms of the level of detail, but all of the regulations ask for the companies to know their customers to prevent money laundering. The second area is risk management. As you enter into the business, understanding your customer profile, understanding the risks, and setting up the appropriate controls in order to effectively do business.

Ibrahim Muhammad: In terms of the ongoing situation; the pandemic had led to a lot of changes and this has pushed regulatory bodies into leaning more towards digital. However, in some markets, people might not have been able to adapt due to lack of infrastructure, so there have certainly been challenges. Broadly speaking, in terms of common regulations we can put it into two baskets: One is the AML (Anti-Money Laundering) and the other is the compacting of terrorist financing. In both these instances and in all jurisdictions, it always comes down to KYC, transaction monitoring and sanction screening.

Farook Al-Jibouri: Particularly when it comes to the Middle East, we do share the same difficulties globally but there are other unfortunate issues and circumstances unique to the region. What I see after the pandemic is a greater diversity when it comes to the Middle East and the level of maturity in the adoption of transformative financial services like Fintech. Some countries have been eager to jump on board but others are still living a hundred years in the past. Still, it’s a cash market where regulators have minimal impact when it comes to controlling the environment. This is what’s driving different regulators in the region to adopt more of a regional approach. The Middle East is ultimately a hot spot when it comes to AML and anti-terrorism. In fact, we are very much leading the way in those areas. The challenge, however, is in how you control different regions and balance them equivalently when there is such disparity in terms of digital adoption.

Is it fair to say that regulators are all for innovation in the Middle East? And is it also fair to say they are taking a lot of inspiration from UK and European regulators?

Farook Al-Jibouri: That’s a complicated question that I couldn’t really give one straight answer to. As I already said, the level of diversity in the Middle East is enormous. There is, however, global pressure from other regulators to bring all of the countries up to the same level and in some cases, those local regulators are simply not doing their jobs. Political complications are slowing the adoption of digital in some situations too. Again, it depends on the specific region. In Saudi Arabia, for example, it was announced recently that the first completely digital bank has been officially licensed by regulators.

Aamer Abedi: I know that when it comes to supporting Fintech start-ups, there is a lot of government support for these businesses in the UAE and Saudi Arabia. Is it fair to say that regulators from the UAE and Saudi Arabia are helping to lead the way in terms of pushing innovation? Perhaps. I believe they are also taking a lot of inspiration from European and UK regulators.

Kathy Tomasofsky: While the Middle East may have different regions that are working at different levels, here in the United States we have forty-nine different entities within a federal regulation and it’s very difficult to navigate. It’s a complex structure and it varies from state to state. For example, the state of Wyoming is very friendly to blockchain and virtual currency but you’re not going to see that in every state.

How far are we from the ubiquitous federal money service license like you have in Europe in the US or the Middle East?

Kathy Tomasofsky: As far as the US is concerned, I’ll answer that question in two parts: The first part is that over the last two years, there have been some movements towards harmonising on a single license. There are currently twenty-nine states that have bonded together. So, if you’re a start-up company and you come into the states, you can have what’s called your level one documents; your financial statements and business plan. These will then be reviewed by a particular assigned state and the twenty-nine other states will say “Okay, we’ll accept these” and it’s as simple as that. Also, we’ve been working with other regulators on harmonising the money transmission law. We expect to have a draft of that sometime this summer, so perhaps beginning in 2023, 2024, we may see a more uniform law.

Farook Al-Jibouri: In the Middle East it can go in different directions. In some countries, opening a bank is extremely easy and in others, you simply can’t do it because the number of banks versus the market has already been defined by regulations. If there is any kind of new license or sub-license, it would be given to the established banks. In other countries though, we are starting to see the licensing of newer digital banks.

How are we doing in terms of open banking in the UK, US and the Middle East?

Ibrahim Muhammad: It’s interesting to see how the US market operates across states. Now, with the UK of course, we’re following the PSD2 standard, and from there we now have open banking. We are enjoying the benefits of PSD2 and though we don’t have passporting rights in the EU we can still redo the applications since they follow the same regulations. So that makes it easier for companies in the UK who would like to expand into EU markets.

Kathy Tomasofsky: In the US, I would honestly say we’re not there yet. There are indirect discussions coming through but we’re not in those open banking discussions like the UK has at this point.

Do you feel that the money transfer industry always plays second fiddle to the payments industry?

Kathy Tomasofsky: I think the introduction of digital and Fintech has made the government more supportive of the whole idea of global payments, whether it’s consumer to consumer or business to business. The fact that remittances fall under that umbrella gives us that support. In general, though, I think it’s more that the banking industry is less inclined to be supportive. It’s very challenging for a company to get a bank account here. There are some things that passed this past January with regard to the strengthening of AML programs and some items there that may help as far as de-risking is concerned, but that remains our pain point here. During the pandemic, these remittance businesses really were a lifeline for many US constituents, and I think that that helped to strengthen the profile of the companies as well.

Post-Brexit, has the government’s stance changes towards the MSB sector? Are they viewing us differently now?

Ibrahim Muhammad: Not exactly, in fact, the FCA has been quite open to supporting innovation in this space and that’s why they were opening up to a lot of Fintechs and new players establishing themselves in the UK. So for the UK specifically I’d say the government has actually been quite supportive.

The concerns that regulators cite can often be addressed by technology. What areas of technology are there in the industry that ensure we meet compliance?

Ibrahim Muhammad: They look into different areas when it comes to transparency; they look into the complaint handling process, incident reporting and the overall system checks and controls you have in place. Of course, AML is one component, so when they do company assessments, they cover all those areas. This assures them of how transparent that entity is towards its customers.

Farook Al-Jibouri: In the past six to nine months there has been a wide deployment of technological systems all across the Middle East but one of the problems is the lack of data. Certain countries probably have a full database but others do not and when you don’t have that database you have to rebuild it. As far as compliance tool deployment is concerned, in some countries, AML is being deployed and pushed by certain regulators but with a specific mandate rather than certain standards. Adopting these systems is definitely going to help in reducing the bureaucracy in the process. Because using certain technologies such as AI and blockchain we can see compliance happening on the fly through automation, rather than being checked manually or via a certain bureaucratic process.

In terms of technology, the US is the most powerful nation on Earth. But when it comes to our payments industry, the US arguably can’t compare with Europe. Why is this the case?

Kathy Tomasofsky: In the US, each state has its own perspective on what’s the best way to serve the consumer. Also, in defense of the regulators, there are so many new kinds of companies and technologies they have to keep learning how to regulate properly. If you look at Bitcoin, for example, some states are regulating virtual currency and have specific laws on their books while others are covering it under general money transmission and some haven’t even taken a pass at it yet. Ultimately, we have lots of interesting products that are being developed and the regulators need to understand what they are, how they work, where is the money going, who holds it, and how to protect the consumers. Then there’s the fact that, at a big-tech level, both sides of the administration are sceptical of companies like Facebook and Google and what they will bring to the US.

Aamer Abedi: It’s not just scepticism at a government level, it’s the big banks too. I know Jamie Dimon, the CEO of JP Morgan Chase is very anti-Bitcoin. You can see these large investment banks being very anti-crypto, but I heard that some of these investment banks have already started preparing proposals for their own cryptocurrencies.

Facebook applied for a money transfer license in Spain a few years ago so you can now use WhatsApp to send money. You have companies like Apple and Google that have money transfer licenses and they’re operating under some sort of regulation. So, should our industry be worried?

Ibrahim Muhammad: The tech giants are definitely jumping into the remittance space and from what I see in the UK and the EU they will have a fight on their hands with the established players. Now, it depends on the approach the big techs take. They might acquire one of the large players and then enter into a partnership or it could be that they establish their own remittance identity since they have a huge customer base to draw from.

Kathy Tomasofsky: In the US I do think that, to some degree, we will see some of the smaller MTOs either disappear or merge with others due to the cost of compliance and licensing. But we’ve also seen in our market research that the selection by a consumer for a particular MTO is often done out of loyalty and is not just price based. I think we’ll see that with age, the younger consumer who’s grown up with technology will be that consumer who is more inclined to go to an Apple or Google Pay transmitter because they will feel a certain loyalty. Even here in the US, in traditional banking, we’re seeing that generation not having traditional bank accounts.

Farook Al-Jibouri: When it comes to the payments industry, what’s happening with the gigantic tech firms is very noticeable and not only in the US. If you look towards China, for example, WeChat predominantly controls the exchange of money over an instant message application and I do think that Facebook took the approach they did because of the success of WeChat. In the Middle East, we don’t have tech firms, but we do have telecom operators who know the technology, and those operators are actually very forward-thinking in terms of bringing those digital wallets and instant money transfers to their customers, particularly in parts of the region where they can get around regulations.

What do you think are the top compliance priorities in the post-pandemic age for any MSB?

Kathy Tomasofsky: In the post-pandemic age, we have seen such an increase here in the US in the remote work area. So security is a big compliance priority for us. We’ve seen specific states here in the US; New York and California, for example; where companies are required as part of their AML program to define what their security requirements are. We’ve seen an abundance of new phishing scams and email fraud here too, so that whole concept is important.

Ibrahim Muhammad: The top priority would be to keep things running steadily despite all the disruption. Because the pandemic has really given rise to something unprecedented. We all know has it has accelerated digital adoption. So, from a compliance perspective, I would say we need to keep pace and adapt to the latest technologies while ensuring that we cater to the needs of the people.

How do we build trust in the industry now, given where we are?

Farook Al-Jibouri: One of the things the ecosystem needs to be ready to build consistently in a post-pandemic world is communication. We all realise now that physical communication is not really there anymore. For example, here in the UAE, we’ve been working with financial companies located a few blocks from here that we’ve never met face-to-face. So, modern communication will be key in re-establishing that flow of data between the technology provider from one side and the receiver from the other side. Also, post-pandemic, you have to be agile with whatever challenges the financial system throws at your feet.

Ibrahim Muhammad: Trust and innovation shouldn’t be competing; they have to go hand-in-hand. Regulatory bodies need to understand what innovation actually brings to the table and how they can ensure that this innovation does not cause any sort of issues with the consumers or stakeholders. It has to be a balanced approach and they have to work in a very collaborative manner. Regulatory bodies need to be more aware of what’s happening in the innovation space, and they should really understand the needs and then set up the regulations accordingly.

Kathy Tomasofsky: I think you have to build trust and communication but I would also add education into the mix, and that goes back to my earlier point – the regulators have so much coming at them that they need someone to help facilitate it all. At MSBA, we represent the services of eighty different companies; from companies that sell prepaid cards to small MTOs. Being able to present such a diverse group to regulators helps to accelerate that communication and education, and helps to build trust.

Our thanks to Kathy, Ibrahim, and Farook for their words and their time.

RemitONE’s award-winning compliance platform is used and trusted by leading banks and money transfer operators (MTOs) all over the world. Our Compliance Rules Engine™ is one of the world’s first business rules-driven compliance platforms. You can simply input the rules set by your regulatory authority and the engine uses its sophisticated algorithm to enforce them.

What next?

Now that you’ve read our article we want to help you get the most out of it and deep dive into the trends and predictions shared.

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Video: Perspectives on Digital ID – What the future may look like (eKYC and AML)

Continuing our recent discussions exploring some of the challenges and opportunities being faced by the remittance sector in these uncertain times, RemitONE hosted a webinar on the 24th of June 2021 regarding the ever-shifting perspectives on digital ID in the remittance sector, particularly in light of the COVID-19 pandemic. The panel was made up of experts from both RemitONE and our friends and partners in other global companies. In case you missed the webinar, here is a summary of the key insights.

Webinar moderator:

Saiful Alom, Head of R&D at RemitONE

Panellists:

• Richard Spink, Sales Director of Channel and Partnerships, GBG
• Osama Al Rahma, Head of Business Development, Emirates Bank
• Reynell Badoe, Payments Manager, Stanbic Bank

Why is digital ID important?

Osama Al Rahma: Digital ID is of course incredibly important through its use of KYC (know your customer) and the ability to identify the customer. In fact, it’s largely through the use of digital ID that we have been able to protect the financial regime from crime on a wide scale. The shift towards digital already started pre-pandemic and has only increased in recent months. No longer are banks encouraging the use of traditional brick and mortar branches. Instead, they are relying heavily on their digital offerings, which by default means that the ability to identify the genuine user of such services is more effective. We’re also seeing a shift to digital with eKYC (electronic know your customer) on a much larger scale when it comes to remittances. This will allow us access to machine learning with Artificial Intelligence, which is incredibly powerful when integrated with real-time streaming. Using this technology, we’ll be able to conduct more diligent processes within transaction screening and monitor the behaviour of certain users in greater depth. For the sake of financial security on the compliance side, this is incredibly important.

Richard Spink: At the end of the day, digital ID reduces compliance costs so it’s always going to be important from a purely financial perspective. However, there is no widely regarded standard for digital ID so far, at least as far as MTOs are concerned. What MTOs have generally been using as the core tenants of their ID is proof of identity and proof of address, which are attributes that can be used by financial services around the world. Of course, a standard would be ideal, but as there are so many different regulations in different countries, this is unlikely to happen anytime soon. As an aside, it’s worth noting that while Revolut has a lot of customers, they’re not profiting very well and the reason they’re not making enough money is supposedly due to the cost of compliance. Digital ID will help businesses globally and save money on the process of knowing who their customers are and the cost of compliance as a result. And I think the technology to do this already exists.

Saiful Alom: It would be ideal if there was a way to digitally identify a person, ensuring that they have met all KYC and AML needs. However, due to the world we live in, there are a lot of complications to work around.

What is the adoption of digital ID like in your respective markets and has COVID accelerated your options?

Reynell Badoe: From a Ghanaian perspective, if you look at the stats, the number of people with access to the internet is proportional to the number of people with access to so-called big data. Having access to the internet means giving up your information and as a result, you also have access to financial services and remittances. It’s a worthwhile trade-off for most. However, there are 1.2 billion people in Africa, and only a handful have access to the internet. While COVID certainly things and meant there had to be a quick adoption of digital money transfer channels from traditional methods, we still have a lot of catching up to do digitally. With regards to how? The pandemic has meant more people have had to use data platforms and open mobile wallets, creating a digital shift of necessity, so the groundwork has already been laid.

Have there been any challenges in terms of Trust Private Security?

Osama Al Rahma: Trust, privacy and security are the three main pillars when it comes to finance and that will never change. The challenge is that by the time that technology evolves, different unforeseen issues tend to arise. For example, using AI for facial recognition might be incredibly convenient when it comes to opening your phone with a glance but the negative consequence is that it is another means for fraud to occur. When we speak up about this, we need validity.

Saiful Alom: In terms of Trust Privacy Security, this is a concern for all of us as consumers – particularly seeing as online services have been adopted at such a large consumer scale since lockdown began. Trust has increased in these online services and so consumers use them more regularly. However, there are many issues to consider and chief among them is privacy. Because your data is a lot more venerable now and consumers transferring money online may question how secure their transactions really are, and if it can be hacked or breached.

Is digital ID a potential solution or a problem to identity fraud?

Richard Spink: If you’re lending money, then I think that there is certainly high risk. It’s a different process to opening up a bank account or sending money on behalf of someone else. The key thing is to ensure you are actually sending that money to the correct person and thankfully, there are more reliable tools that are able to detect these issues now. It comes down to the organisation’s fraud screening processes. The question is how much information are you able to acquire and what does that fraud screening process look like? The standard answer is that there is no silver bullet – there isn’t one organisation that has everything available to run the process at zero risk. However, in the same way, there is always risk in a face-to-face transaction too. As we all know. “Good friction” is necessary for both scenarios. What has changed in the digital process is that it is now acceptable to present an identity, run that process with a mobile phone and check for duplicates. In the future, things will get even more secure with the use of biometric technology and face recognition, thumbprint recognition and the ability to check a chip on a passport. This last process is something we’ve started working with recently. In all, there is a lot more information that is available when trying to detect fraud these days, however, the same rule still applies: you need to decide what information you want to capture and make a decision on it.

The government has been known to over-regulate and stifle innovation. Do you think that we have the right balance when it comes to trust vs innovation?

Reynell Badoe: I think that the government has a lot of responsibility to provide the basic and necessary requirements and nothing more. On the issue of trust, we’ve seen leakages in the past – breaches of customer information from companies. So, on a consumer level, there is the issue of trust to contend with, as people are sceptical as to whether or not their information is safe. An example of this is free apps – technically they’re not “free” in the sense that you give up some aspects of your digital ID data in exchange for access to that app. I’d say the question is: can the information be used against me in the future? In terms of innovation, there’s a need for better services – we need a safer place to operate without having to worry about any of these concerns and challenges. There needs to be a fine balance between regulation and opening up certain aspects of digital ID.

Where does the government sit within this space in terms of digital ID?

Osama Al Rahma: When it comes to the government, it comes down to the level of leadership of that nation and their perspective on digital transformation. They then need to lay down the military frameworks, the standards and the security aspects in order to develop a secure environment. It’s been said that once you introduce digital financial services then it’s not a case of if you will encounter fraudsters but when. There is a lot of truth to this adage, as I have seen myself when we launched a remittance app and immediately fraud occurring on a massive scale. The reality is that if you are not well-enough equipped in different aspects, you will likely encounter problems. One of those aspects is having clear risk mitigation policies, and the second is to use advanced technology to identify such risks. A third aspect, meanwhile, is knowledge and awareness. Most issues I’ve seen actually involve the consumer allowing the phishing to happen due to his lack of knowledge on how scams can occur. It’s all about protecting your consumers.

What advice would you give to MTOs and banks who are thinking of adopting digital ID within their processes?

Richard Spink: My advice would be to keep things simple and understand the regulation before you talk to a business like us. Everyone will give you different advice on regulation. In my world, I need to understand the regulation of the market the jurisdiction is operating in. For example, if your business is registered in Germany, the German financial regulation is very specific on how want that ID verification process to run. In fact, they want it done via video. But this isn’t the case for the whole of the EU. So, although the EU is one trading block, in theory, in practice there are different processes required depending on where your business is regulated. I’d also recommend considering what you need to do to confirm that someone is who they say they are. In my experience, finding proof of address is the hardest process and yet it’s required by most regulators. My experience in the last ten years shows that the proof of address data is large in quantity however there is still nowhere near enough to satisfy the global coverage.

What are the critical questions you will ask an ID verification provider?

Osama Al Rahma: Before asking the questions, develop your own strategy and consider what you will want in the near future, including your offerings, products and other engagements with the consumers as this will dictate the type of provider you want to consider. On one hand, look at the flexibility of upscaling the technology, as you want someone to partner with as opposed to a short-term solution that will leave you stuck with a legacy system that will hinder your ability to enhance your offerings in the future. On the other, look at the ability of the service provider – have they got a system that is dynamic enough to cope with the constantly shifting regulatory requirements?

What do you think this space will look like in two to five years?

Reynell Badoe: At this point, it’s all speculation, especially with the speed at which technology is advancing. For example, things that one would have expected to happen in a decade could happen as soon as next year. At this point, there’s already a lot of personal information online both knowingly or unknowingly. Now, people are less concerned about giving away their data and are more concerned about where it’s going. For example, if there’s a new online financial institution that people are gravitating towards then I, as a customer, would want to find out a bit more before parting with my information. This has led to the use of federated IDs where I can sign in to a website using my existing Google account because I would naturally be more comfortable leaving my limited information with Google as opposed to this relatively unknown third party. I personally expect to see a lot more use of federated IDs in the future.

How do you see the rate of digital adoption in sending and receiving markets, in terms of duration, post-pandemic and pre-pandemic?

Osama Al Rahma: During the pandemic, I think the main shift was that consumers released how digital engagement was beneficial to them. Why do you think China was able to so effectively control COVID-19? It’s because of their AI and biometrics. They were able to use this to track and trace the people who had been in touch with an infected person and find out which areas they were prominent in. The only positive, economic growth in 2020, in comparison to other developed countries, was China and one of the primary reasons was this biometric ability. This is already being applied elsewhere today – going through an airport completely contactless, for example. With regards to the future, the adoption of these new methods should be reviewed seriously by all financial companies. It might be a slow burn but always look at how they will impact your business model and how you will be able to use them to your advantage in the future.

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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

Video: Better Together – Building a New Global Standard for the Remittance Ecosystem

Continuing our recent discussions exploring the challenges being faced by the remittance sector in the wake of the COVID-19 pandemic, RemitONE hosted a webinar on the 23rd of June 2021. The 90-minute conversation centred around the concept that in order to “build back better” after the pandemic, the money transfer sector needs to work together to create a new global standard. 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, RemitONE

Panellists:

• Hugo Cuevas-Mohr, CEO at Mohr World Consulting
• Sidharth Gautam, Head of Sales at AZA Finance

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

Hugo Cuevas-Mohr: I’ll begin by defining what remittances actually are. The term remittance implies a family member sending money to other family members, for example. Remittances for the world bank, meanwhile, are only considered “worker remittances”, so the money transferred between family members is around 650 to 700 billion dollars per year of recorded remittances. On the world trading stage, of course, this number would not be extremely significant, but it is important to understand that this is higher than the investment from one country to another. It is also much higher than the aid that developing countries receive, so the significance is relative to different countries. In terms of significance, it varies depending on the development of the country. By comparing the remittance figure to GDP you can see that some countries are at 30% to 35% of their GDP, which is the case in Nepal and Haiti, for example. Interestingly, by contrast, big countries such as China and India will undoubtedly have high volume, however, there is less significance as the GDP is low. Another comparison is the population: if you divide remittances by the population of the country, then you can determine the significance of the remittance ecosystem based on each average individual in that country. Using this logic, Lebanon is number 1 in terms of significance, as it is a small country with a small population and a huge amount of money every year. This same principle can be applied to towns as well.

Sidharth Gautam: I completely agree with Hugo. In fact, in a few south sub-Saharan countries, remittance is essentially their backbone. There is a word developed by the World Bank called LMIC: “Low and Medium Income Countries.” Remittance is incredibly important for LMICs. Their entire country arguably depends on them.

Hugo Cuevas-Mohr: Adding to that point, remember that money goes to the lower fourth or the lower fifth of the economy. Remittances are also an important backbone for poor families in LMICs, therefore they are a really important “backbone” for them. Regardless of how those poor families spend the money, it doesn’t change the fact that they depend on remittances to survive. Indeed, sometimes 60 to 70% of a poor family’s income is primarily derived from remittances.

Who are the traditional and new players within that ecosystem, focusing on the traditional versus new and formal versus informal?

Hugo Cuevas-Mohr: It depends on a few things. In remittances, there’s always a sending market and a paying market. With regards to the pandemic, there was a small decrease in certain countries, particularly if they depended on Europe. However, if they depended on the United States you actually saw an increase, which was completely unexpected. The traditional sending players have always been agent-based, so brick and mortar operations were affected negatively in the early part of the pandemic as people couldn’t visit those agencies. As a result, every new digital player saw an increase. The more digital the payment; the higher the remittances would be, for example in Africa, mobile money companies saw an increase in sales during the pandemic due to the fact that remittances landed in mobile wallets. So we have seen transformation, however, I think it is too early to tell what will change and what will stay the same as traditional companies are evolving.

Oussama Kseibati: In the past, in traditional Asian markets cash has always been king. But over the past 10 years we have seen innovation being brought into the market and a move towards digital that has been hastened by the pandemic. I think as we get to the second and third generations that are more innately familiar with new technology, things are only going to get better.

How do you think we can enhance payments through successful partnerships and working together?

Sidharth Gautam: Partnerships are absolutely critical. No one organisation can facilitate change by itself; it has to be a concerted effort. We all have our core competencies, so the best practice should be to focus on these competencies and then align with partners who have a laser sharp focus in another  particular area. AZA Finance is a firm believer in that, and our partnership with RemitONE is proof. It’s a natural combination of one plus one rather than automatic progression. That way you can start to create an ecosystem of consumers, brick and mortar agents, digital companies, aggregators (AZA) and technology, providers like RemitONE. All of these players have come together to give a seamless, end-to-end experience to the consumer. There is no point in reinventing the wheel but we have to drive meaningful and coordinated change at a global level over a sustained period of time to make it happen.

Hugo Cuevas-Mohr: Sidharth is right on the money. It maybe even as recently as a year and a half ago, partnerships in this space weren’t really stories but it’s booming now. You have to understand that traditional companies did everything on their own and always built their own systems, distribution, networks and compliance. But that’s the old way of doing things and for some companies, it can be difficult to break the habit. There are so many legacy remittance systems right now, and sometimes it might be best to just scrub the old system entirely, salt the earth and start with something fresh. Realise what you’re good at – the thing that makes you different, and work with partners to fill in the gaps. Also, remittance is one financial service and there are many other financial services the same customers need, so you have to integrate those services. Unless you want to do all of that yourself, which becomes rather complicated, it’s always better to partner with a company that has the right knowledge and resources. The new breed of digital banks are all being built on that more modular way of thinking.

How does one foster a good working partnership?

Hugo Cuevas-Mohr: In our industry, the important partnerships that we have is with the banking sector and sometimes we forget that. It’s been hard in some markets to build good banking relationships and now you’ve also got cryptocurrency and the new wave of digital banks to deal with too. You need to create that banking partnership to provide that flow of funds in the collecting and disbursement sites and if you are cross-border you’re also dealing with foreign exchange, so you need to be able to be very good at managing currencies. How that partnership is able to exist and survive is all about transparency; sitting down and being honest with each other – what you need, what you’re willing to provide and how that partnership is going to be organised.

Sidharth Gautam: We are the biggest non-bank currency provider in Africa and apart from Southeast Asia, Africa is one of the biggest remittance receiving markets in the world. So we get a lot of requests from small and medium-sized MTOs that want to expand into Africa but lack the knowledge and the data to do so. They don’t have those resources like the big larger MTOs where they can hire a market research team and that is where the partnership comes into play. So, not only do we give them an aggregator and last-mile liquidity but we also help them with Google Analytics, for example. I feel like marketing is where you explore the unexplored and it takes a partnership to the next level. That’s where long-term relationships get forged.

How can you sort a good partnership from a bad one?

Sidharth Gautam: It is very clear to me what my core competencies are and where I can leverage somebody else’s competency. It’s both a mix and a marriage between two equals and it has to be built on a common remittance platform for everybody. There are always going to be challenges. We are a regulated industry so you can’t just partner with anybody. You need to be very clear as to whether or not your partner is certified and that is the basis of any partnership in our business. Remittance is a very fragmented industry – the top three players have major market shares and yet every day you see new players coming up, primarily in the digital space where you can launch in the space of a few months. So there are lots of little guys scrambling for attention that might not be on the same page as you from a regulatory perspective. So do your research. What you also need to see is how potentially scalable that partnership is. For a successful partnership, it is important to understand not only your core competencies but what you want to achieve by having that partner on board and where you want to end up.

Oussama Kseibati: I agree. In fact, I’ve known companies in the past that have chosen certain providers they want to grow their business with but because they’ve used a certain tech provider it’s very hard for them to now uproot their whole business and take clients over to a system that they can scale. Again they’ve gone with someone who’s slightly smaller or built their own system and it causes more headaches further on down the line.

Hugo Cuevas-Mohr: Partnerships sometimes don’t work. And that’s fine. Sometimes I speak with companies and I have to be quite philosophical about it and say that sometimes it works and sometimes it doesn’t and you can’t really put a finger on why. Also, companies change and you have to be flexible to see where the market, takes you. Maybe you need to get rid of a partnership because you’re going in a different direction? So flexibility is something that you must have in this market. The pandemic has arguably made it even harder for everyone to plan for the long term, so you need flexibility about how you set up your structure. Flexibility is part of the game in everything we do these days. Even as people we need to be flexible enough to adjust to new ideas and new possibilities.

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

Hugo Cuevas-Mohr: Remittance as a Service (RaaS) is so interesting because it has been such a long time coming. It is essentially an all-in-one solution that allows companies to launch money transfer software services from any particular geographic location. How does it work? Let’s say you have a good brand in Southeast Asia or in Africa and you want to do business in the UK. Maybe you can put your own brand in a product like an app or a mobile wallet and it is your image but using a third-party service. That’s the deal –  I give you my brand and we do a partnership together, all those remittances come to me but to my client in the UK or in Europe, it’s the brand they’re interacting with. You’re behind the scenes. It’s really going to change the market. What all regulators want is better service and lower cost; a more compliant remittance system and this could definitely give them that.

How can remittance fix the gig economy, and how should we participate?

Sidharth Gautam: That is my favourite question so far! We are all are so used to hearing this word, “gig economy,” but what actually is it? Let’s talk stats. As of 2020, 1 in 10 people in the UK is employed by this “gig economy,” the equivalent figure in the US is around 8%. By 2024, one in four people, which is 40% of the workforce, will be in the gig economy and how can remittance solve the problem? Let me give you a real use case: An Uber driver in the UK gets paid directly into their bank account, which is fine, of course. Now, let’s shift this problem to Africa, or Tonga or some other nondescript, sub-Saharan country where almost one-third of the population doesn’t have a bank account. How do these Uber drivers get paid? That is where this whole idea of mobile money and digital wallets comes into play. That’s what the gig economy is doing and up until now either these people are getting left out or the  bank charges are not transparent and it takes ages for these guys to get paid. In the US and the UK, you do a transfer today from the UK and it’s in the US account the next day. But for Africa, it can take a week. I mean, it depends on the intermediary bank that might have its own checks charges but also, in certain parts of Africa there is one soft currency for seven countries and the banks of those seven countries don’t talk with each other. That is where organisations like ours play such an important role in the gig economy, helping these people get the money, faster and quicker because that’s the way forward.

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

RemitONE integrates with payment gateway Vyne

RemitONE, the leading global, technology and business services firm for the remittance world, today announces its integration with Vyne, the specialist account-to-account payments platform. 

The deal gives RemitONE’s 100+ remittance clients instant access to Vyne’s payment solution, becoming the fastest, most cost-effective way for their customers including Payment Institutions (PIs) and Money Service Businesses (MSBs) to send remittances globally. 

Vyne uses Open Banking to move money in real-time between bank accounts, bypassing long-established but now outdated card networks and their associated fees. Vyne’s single integration means RemitONE’s clients can access the benefits of Open Banking including more secure, cost-effective, faster payments. With transaction times cut from days to seconds, RemitONE’s clients’ customers can send money abroad quicker than ever. 

Because Vyne allows customers to make payments directly from their own verified bank account, “know your customer” (KYC) checks and “Secure Customer Authentication” (SCA) fraud authentication can be carried out quickly and seamlessly, reducing friction and vastly improving the customer experience. 

Aamer Abedi, Chief Marketing Officer at RemitONE, says: “RemitONE is always seeking the most innovative payment products for our clients. The technical ease of Vyne’s payments platform allows MSBs to get up and running quickly, and offer their customers an efficient, robust and cost-effective way to transfer money. 10% of our MSBs took the first steps to integrate with Vyne within two weeks of the integration going live, with more client MSBs wanting to take advantage of Vyne’s Open Banking Solution every day.” 

Karl MacGregor, CEO at Vyne, says: “The international money transfer market is booming. Globalisation and the rise in digitalisation means there’s an increasing need to send money abroad as quickly, easily, and cost-effectively as possible. This integration combines the power of RemitONE’s renowned money transfer solution and global network, with the easy integration, instant settlement, and fraud resilience of Vyne’s payments platform. Together we are opening access to a new way to pay, allowing remittance businesses to offer the significant competitive advantage of safer transfers and more seamless customer experiences.” 

Take advantage of the RemitONE and Vyne partnership by contacting marketing@remitone.com

About RemitONE

RemitONE is the leading provider of money transfer software solutions for banks, telcos, and money transfer operators (MTOs) worldwide. Organisations of all sizes use the RemitONE platform to run their remittance operations with ease and efficiency by reaching out to their customers via multiple channels including agent, online and mobile. For more information on RemitONE, please email marketing@remitone.com

AML and CFT Guide for Money Transfer Start-Ups

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT), are terms mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect, and report money laundering and terrorist financing activities.  

Every regulated entity should have appropriate AML as well as CFT checks and controls in line with the regulatory framework of the jurisdiction where the entity operates from.    

To make it easier for Start-Ups, please find below the diagram of the AML/CFT Ecosystem:

The ecosystem shown above shows the five core responsibilities of Money Transfer Start-Ups:

1. Onboard a Money Laundering Reporting Officer (MLRO) 

First and foremost, all start-ups must have a dedicated Money Laundering Reporting Officer (MLRO) who is responsible for managing all compliance activities within the organisation. Depending upon the type and size of the business, there could be one or more members within the compliance team.  

Aside from the MLRO, it is important that other stakeholders such as Directors, Senior Managers and even Shareholders familiarise themselves with the Payment Services and AML regulations within the jurisdiction where the business is registered.

2. Customer Due Diligence (CDD) 

Each entity is responsible to identify the customers that they deal with. This step is known as the Know Your Customer (KYC). The MLRO has to identify the checks and controls that need to be in place to capture all the information needed from the customers as part of the KYC process. 

Apart from KYC, the entity must also maintain the Customer Due Diligence which is mainly to do with checking the customers registering against the watch lists and the transaction patterns of the customers. 

3. Suspicious Activity Reporting (SAR)

The entity is required to conduct appropriate investigations whenever an event such as a transaction monitoring alert or a sanctions match occurs. The MLRO has to validate such investigations further and need to report to the local regulatory bodies in the form of Suspicious Activity Reporting (SAR) or Suspicious Transaction Reporting (STR).

4. Record Keeping

The entity is responsible to maintain records of all their customers and transactions for a minimum period of 5 years or as per the guidelines of the local regulatory bodies. The MLRO has to ensure that the data captured from customers for identification and transaction purposes are stored securely and accessible to the authorized individuals of the entity whenever needed. Apart from customers and transactions data, the entity should also maintain the records of all the SARs/STRs. 

5. Registering and Reporting to Regulators

The entity is responsible to have the registration done with the relevant regulatory bodies in the jurisdiction where the entity operates from. The entity should also be aware of all the reporting obligations in order to submit reports related to the customers or transactions data to the relevant regulatory bodies in the jurisdiction.  

Whether you are a start-up or an established Money Service Business, it is very important that the AML policies and procedures are clearly incorporated within your business model. For more information, advice and support, please contact us.

RemitONE provides proven compliance products for Money Service Businesses and Central Banks and would be delighted to help your business. Contact marketing@remitone.com or call +44 (0) 208 099 5795.