- December 10, 2020
COVID-19 struck and the world has changed overnight! Initial global strategy was on taking precautions, followed by partial closures and then total shutdowns. From China to UK to US and to Africa, Schools closed, workplaces got either closed or changed their practices. Social lives got replaced with social distancing measures. It was unprecedented and unexpected. People were forced to take new responsibilities, companies got to think of new ideas and innovate as quickly as possible, just to sustain!
One community on which the effects were drastic were – Migrants. As travel banned, they were unable to visit their loved ones. Worries grew when public access to Banks and Exchange Companies became very limited or sometimes even closed. This made it even more difficult for them to financially support their families back home. As countries across the world enforced lockdown to contain the pandemic, jobs became redundant, especially in Airlines, Travel and MSME businesses, and employers had to choose between lay offs, pay cuts, and in many cases a combination of both. The World Bank’s latest Migration and Development Brief “COVID-19 Through a Migration Lens” predicts that remittance flows overall to low- and middle-income countries will slump by around 20 percent, falling from US$554 billion in 2019 to $445 billion this year – “the sharpest decline in recent history.”
Understanding remittance market
The Global remittance market has traditionally been a Cash based system of sending money across the borders, wherein the transferor pays in Cash to the Bank or Exchange Company at the source, and another Bank, Exchange Company or Payout Agent pays Cash to the Beneficiary Recipient. It is an important source of sustenance for families in, and foreign exchange for, developing countries. Over the last couple of decades, with the advent of Technology enabling Immediate Transfers between Banks in many countries, the reliance on Cash Pay out as a mode of Transfer has fallen in such countries, but not been eliminated. For 66 countries, inbound remittances represented more than five percent of GDP, often exceeding foreign direct investment (FDI) and official development assistance (ODA) flows. They accounted for more than 20 percent of GDP for some countries, including Haiti, Honduras and Nepal.
There are regulated and un-regulated channels, each operating with common and sometimes exclusive sets of challenges related to regulation, transparency, costs, etc. But the most common challenge each of them face is handling the logistics of cash and people. Digital remittances were slowly evolving and coming out of age, but then COVID-19 happened!
How technology is re-defining the remittances
In some ways, what pandemic did was to accelerate the pace of changes in remittances industry. The legacy businesses offering cash-based remittance services forced customers to think of alternatives. Let’s take as an example example what we at Al Mulla Exchange did. Way back in 2006 when the only way of sending money home was either through Western Union or by couriering Bank drafts, Al Mulla Exchange pioneered in Kuwait and was one of the first in the Gulf, to work with Banks in India, Egypt, Sri Lanka, Philippines, and other popular Expatriate origins, a system of File uploads of Remittances to Banks, which then executed the files the next working day. This reduced the time taken for getting funds for the customer from the previous 7-14 days, to less than 48 hours. Then in 2008, we were the first Exchange company in Kuwait to introduce API protocols with Banks combined with Straight Through Processing at both ends, which further shortened the Turnaround Time to between 5 seconds to 2 minutes. In 2011 we introduced Self Service Kiosks at our Branches where the customer could not just do his or her transaction but pay for it in cash, and even get change back from the machine! We then became the first exchange company in Kuwait to introduce Online/App based remittances way back in 2017. In all the technologies that we rolled out, the customer experience was the epicentre of our objectives. However, we did get feedback but formally and informally from customers in the pre-COVID era, that they still preferred the human contact and relationship that they get when they visit our Branches to do the transactions.
Then COVID struck and Kuwait started its containment from March 12, 2020. Unlike many other Exchange Companies who had not envisaged restrictions or complete closures of Branches, we were in a much better position and able to service under customers even during a full country-wide lockdown. We ramped up and enabled sophisticated and automated technological tools to enable and assist the customers to transfer money, while sitting at home. The company launched Payment Link facility by which existing customers could easily send money – all by making a phone call. The company representatives after verifying all the details, generated and sent Payment Link to the customer on their phones, clicking on which they needed to make Payment through their Debit Card and that’s it. Their remittance was done.
In another first, Al Mulla Exchange launched e-KYC service that enabled the customers to register for Online / App remit facility by uploading their KYC documents through the App, all while sitting at home. The company saw unprecedented growth in online / App transactions and it showed that people are willing to shift to digital when processes are made simple and are provided adequate guidance.
During the lockdown period, the Company made elaborate arrangements to enable their key support staff across all the departments to work day and night to assist customers in every step of the new technological processes and help them in executing successful transfer of funds. The Social Media team and customer care teams, which were getting flooded with customers messages, worked day and night and made sure that every customer query was attended to, and their problems solved.
Other companies too rushed to the technology to bring in new methods of remittances for their customers. The App became the buzzword and Social Media primary mode of Customer communication!
Mobile technology is helping to make remittances convenient, secure and more transparent and Debit Card is becoming the basic fodder of the industry.
The future ahead
The continuous developments in FinTech space globally is bringing in new opportunities to redefine the processes, values and purpose of remittance industry. Digital is definitely the future, but it has many facets. Mobile Apps and Websites are only one side of it. Customers have to learn the importance of maintaining confidentiality and security of their online accesses, and not fall prey to scammers who are ramping up their efforts and cheating people. The positive developments in Blockchain Technology and Social Media based Payments have shown that the future is bright, less complex and more transparent. Which all are going to dominate the global remittance market ? Well that’s a $550 Billion question !