Remittance and payment business

People queuing at money exchange houses to fill in remittance forms could soon be a thing of the past. More people are using mobile phones to send money home — resulting in instant transfers
There is a silent revolution happening in the money transfer business. From over-the-counter and demand draft, it is moving towards mobile phones.
The global remittance and payment business is undergoing a fundamental shift — from cash, demand draft and pay-orders of the past to telex transfers, wire transfers and instant cash in the present to mobile-to-mobile payment in the future.
Remittance is a $350 billion (Dh1.28 trillion) annual business worldwide, of which approximately $60-$65 billion flows across the Middle East and North Africa. Most of these are channelled through the traditional systems — something that is changing.
High oil prices, which have hovered over $100 a barrel in recent months, continue to provide a much-needed cushion for migrant employment in, and remittance flows from, the GCC and Russia," the World Bank said in a report.
"Oil-driven economic activities and increased spending on infrastructure development are making these destinations attractive for migrants from developing countries. Remittances from the GCC countries to Bangladesh and Pakistan (where the GCC countries account for 60 per cent or more of overall remittance inflows) grew by 8 per cent and 31 per cent respectively in the first three quarters of 2011 on a year-on-year basis. Flows from the high-income countries in the Middle East to the Philippines also grew by nearly eight per cent during this period."
While officials of regulatory bodies, including central banks, mobile phone service providers and banks, are scratching their heads on developing mechanisms, mobile phone-enabled payments have already begun in different parts of the world in various formats.
Officials say it's just a matter of time when people from one country will be able to transfer cash to beneficiaries to another country without having to stand in a queue in front of banks and money exchange houses, filling out remittance forms.
Although payment for essentials, including shopping and bills, and remittances are two different things, any cross-border payment has to undergo certain checks and regulations. While the market demands deregulation, governments seek stricter control over the flow of cash, thus limiting the business.
The spread of mobile phones in rural areas across the globe is helping cash to flow more easily by cutting red tape, fees and enabling instant transfers — giving the beneficiary the convenience.
Mobile phone subscriptions have crossed six billion and more than 4.2 billion people out of the 7 billion people worldwide use at least one cellphone — which will become the preferred device for not only communication, but also for m-commerce. This is also catching up in the Middle East.
"Despite the changes, the traditional brick-and-mortar money transfers and over-the-counter payments will continue," Sudhir Kumar Shetty, Chief Operating Officer of the UAE Exchange Centre, told Gulf News. "However, new technology will emerge and a large number of people will shift to the new system, while the traditional money exchange formats will also remain due to the fact that a large number of expatriates here are not tech-savvy enough."
Card-based payments have increased in the Middle East from 12 per cent in 1998 to 31 per cent in 2010.
In 2010, card-based payments recorded in the Middle East stood at Dh46 billion against cash payments worth Dh301 billion. In 2015, card payments are expected to reach Dh79 billion and cash payments Dh353 billion, according to a report by research firm Terrapinn.
The number of debit and credit cards in circulation is expected to double in the Middle East from 9.49 million in 2010 to 18.81 million in 2015.
Unchartered territory
The total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions is expected to jump from $240 billion in 2011 to $670 billion in 2015, according to data compiled by Terrapinn.
However, the future is mobile.
"With mobile money transfers getting momentum, we are entering into uncharted territory. We need to do a lot of things to enable cross-border mobile-to-mobile money transfers," Jean Claude Farah, Senior Vice-President for Middle East and Africa, Western Union Financial Services, says.
The Middle East is a manpower-generating region where people migrate to earn money to be able to support families back home.
"We are located in a region that is home to Saudi Arabia — the second largest remittance market with $27 billion outflows in the world after the United States, which is source to more than $42 billion," Farah says.
Remittances to developing countries from the Mena region are expected to increase from $35 billion in 2010 to $40 billion this year, according to a report.
"People have been moving from demand drafts and tele-graphic transfers to instant cash for some time. Now, they are shifting to online payments and mobile payments."
Remittance flows to developing countries were expected to total $351 billion in 2011, and worldwide remittances, including those to high-income countries, will reach $483 billion, according to a World Bank brief on global migration and remittances.
The top recipients of officially recorded remittances, estimated for 2011, are India ($58 billion), China ($57 billion), Mexico ($24 billion), and the Philippines ($23 billion). Other large recipients include Pakistan, Bangladesh, Nigeria, Vietnam, Egypt and Lebanon.
"While the economic slowdown is dampening employment prospects for migrant workers in some high-income countries, global remittances, nevertheless, are expected to stay on a growth path and, by 2014, are forecast to reach $593 billion," the World Banks said in its latest report.
Of that, $441 billion will flow to developing countries. The bank expects continued growth in remittance flows going forward, by 7.3 per cent in 2012, 7.9 per cent in 2013 and 8.4 per cent in 2014.
"In addition to streamlining regulations governing remittance service providers, there is a pressing need to improve data on remittance market size at the national and bilateral corridor level," said Dilip Ratha, Manager of the World Bank's Migration and Remittances Unit. "That will stimulate market competition and also help in more accurate monitoring of progress towards the ‘5 by 5' objective." [Agreed objective of reducing global average remittance costs by five percentage points in five years.]
NBAD: app boosted
The National Bank of Abu Dhabi (NBAD) has re-launched its mobile phone application, the one-touch banking is available for the Android, BlackBerry, iPhone and all smartphones that offer customers full control over their accounts, allowing them to transfer funds including remittance transactions, pay utility bills, make donations, and view all their accounts using their devices.
The NBAD mobile application, which is free, has a special feature allowing consumers to send money to themselves, which allows withdrawal of cash at an ATM without a card but by using a PIN that is sent to the account holder by SMS.
"The new NBAD Mobile App extends our superior services to iPhone users and since NBAD is the first to allow international remittances, it is unique in the market," said Ahmad Al Naqbi, the Head of Direct Banking and E Development at NBAD.
The UAE has one of the highest mobile penetrations standing at nearly 200 per cent. Smartphone penetration is more than 15 per cent and expected to rise to nearly 30 per cent by 2015.
The mobile app service also allows remittances through NBAD's partner MoneyGram. The remittance feature allows consumers to remit internationally to anyone worldwide where receivers can cash out the money from any of the 277,000 MoneyGram agents located in 190 countries within ten minutes. This is particularly suited to the expatriate segment in the UAE that typically sends funds to a recipient in other countries as it benefits millions of people across the globe