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Ten most important issues of the internal money transfer industry

1- If one looks at the remittances figures in FY19, overall increase in volumes from the US and UK will be observed. The valuation effects of the US dollar appreciation against the currencies of remittance-source countries, especially the rupee, influence the impact of growth in remittances. The continuing recovery in the US and a modest acceleration of economic activity in Europe are producing a general increase in overall volume.Coupled with fairly stable prices and competition mostly based in the forex spread, the traditional MTOs have been more optimistic in 2018-19 than in previous years. But, as is common knowledge, the unrecorded flows through informal conduits, is without a doubt, considerably larger than the formal channels.

2- De-risking in the UK is still a problem, however, there has been a slight shift in the market with small banks opening accounts to industry firms amidst higher costs and strict compliance requirements.

3- Price to the public of industry services have been fairly stable during the year with a slight upward trend even though competition in every channel is fierce, more so in the exchange spread than in the fees. US dollar valuation impacts the markets; when the exchange rate in the paying country rises continuously, the exchange rate price competition subsides and volume sent increases.

4- Mobile Money Services continue to expand across the developing world with new cross-border functionalities, systems integrations, partnerships, and regulatory advances for the industry. Domestic use of mobile transfer services spreads. The Global Mobile Systems Association (GMSA) reports that mobile money industry continues to expand globally, with more than 250 live mobile money services in nearly 90 countries. Also, more than 20 deployments have at least one million active mobile money customers and, in 16 markets, there are more mobile money accounts than bank accounts. Mobile money usage continues to be dominated by domestic person-to-person (P2P) transfers and airtime top-ups. Mobile money providers are moving into international remittances at a fast pace, working on interoperability while companies are providing interconnection bridges or hubs between MTOs and mobile money operators.

 

5- Investors and bankers are favoring digital channels, overwhelmingly, and not only is the valuation of digital money transfer companies very high, but there is very small interest in the investment world for investing in traditional agent-based MTOs.The increased adoption of these channels is creating a digital divide in the consumer base that needs to be investigated further (wealthier senders using low-cost channels). The two major challenges of the industry now are fraud prevention and finding reliable and knowledgeable merchant services providers willing to provide debit card processing.

6- FinTech startups in the money transfer space are raising capital to take on the incumbent big banks and MTOs, and increase their share of a market worth in excess of $500 billion, becoming billion-dollar-valued companies in the process.

7- With the acquisition of Xoom by PayPal, many more mergers and acquisitions are on the cards in the international remittances industry.

8- The trend of falling remittances is being reversed with fiscal spending and construction picking up in the GCC countries as the effects of increasing oil prices continue.

9- The rise of P2B and B2B services in the industry is making the “payments” side of the International Money Transfer & Payments Industry more dynamic and more important, overall, with new services, new entrants, and new offerings.

10- Bitcoin, as a remittance tool, is now being used by a few pioneer firms, while the overall acceptance of the blockchain protocol as a significant invention has shifted the rhetoric about virtual currencies for the better.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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