According to researchfrom Juniper Research, nearly $55bn in international remittances will be enabled via mobile devices in 2016, up from less than $12bn this year. A recent EU Green Paper says the mobile the landscape is too fragmented. But, asks Alison Ebbage, is that fragmentation all bad?
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Mobile remittances along established migration corridors such as the US-Mexico and intra-regional transfers across Africa and the Middle East, are growing as increasing numbers of migrant workers look for cost-effective solutions for sending money home from foreign countries. But Juniper found that substantial inter/intra-regional activity from and within Western Europe will see it become the largest region by volume by the end of 2016.
But with such a fragmented market any P2P payments provider has to be able to provide both global scale and solutions tailored to individual markets.
Indeed globalisation means increasing flows to, from and within both developed and developing markets. It also means newer segments such as micro businesses wanting P2P type services. Providers need to be able to provide a seamless interoperable service and the industry is clearly cognisant of this with plenty of activity in recent months, pointing to a widespread move to offering a global capability.
But having global reach is only one part of the equation. Because the P2P market is so fragmented each piece of the pie has its own specific needs from both a sender and recipient point of view. No single player can hope to emerge a global behemoth instead providers must thus be able to tailor their global offering to each and every segment they hope to attract if they wish to be successful.
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By GlobalDataJohn Chaplin, president of Ixaris CQ says: The ideal solution is to be able to deal with any system and any payment method preferred by both sender and the recipient. Its interoperability in terms of industry participants and in terms of the end user.
Complex landscape
In practice this means that all the various industry channels such as banks, transfer agents, mobile networks and other specialist service providers all need to be able to connect with each other and look seamless from a customer point of view.
To illustrate the point is the SwiftRemit platform. It was first launched in 2009 but rebranded in September 2011 to include pensions payment capability. In addition the platform can now support cancellation or modification of existing remittances without having to cancel and set up from scratch.
We are a brand neutral and provide the network between the various connection points and we can be white labelled so as to be totally invisible. Our clients include banks, money transfer services like Western Union and Moneygram and services providers such as Earthport, says Anne-Sophie Walravens, banking market manager: remittances and payment exceptions and investigations. She cites some of the platforms biggest users as La Caixa in Spain, Citi in the US, Habib bank in the UK and Al Barid, the Moroccan post office, which has 1,800 branches and is thus, clearly the sort of customer we would want to attract to the platform, according to Walravens.
Networks working
At Visa meanwhile moves are also afoot when it comes to next generation payment methods notably mobile. The aim is to enable consumers to transact wherever and whenever they choose, using a card, a computer or a mobile device.
In Europe this has taken the form of Visa Personal Payments, a mobile app designed to link any visa card (credit, debit and prepaid) to any visa card, The card is currently being adopted by Visas member banks and can currently only be used in a single currency in within Eurozone countries. The expectation is that the functionality will extend as more banks take on the product according to Eleanor Orebi Gann, head of business and technology PR at Visa Europe.
Visa Incs recently-acquired Fundamo platform provides mobile financial services in developing economies. Visa is also expanding its relationship with Monitise, a provider for financial institutions in more developed geographies. This combination will significantly boost Visas mobile financial services and payments capabilities across the full spectrum of uses, geographies and mobile environments.
Another new development is the MasterCard/Western Union offering. The agreement effectively makes MasterCard the preferred brand for Western Union-sponsored prepaid programmes around the world, and makes Western Union the preferred money transfer service for MasterCard. The end result is an interoperable global network to transfer and load funds onto prepaid cards.
In a statement, Hikmet Ersek, president and chief executive officer of Western Union said: Were opening up more options for consumers around the world by combining Western Unions global network of money movement solutions with MasterCards world class global electronic payments network.
But changes in the established corridors as well as rapid technological advances, mean that providers now really do have to be all things to all people.
Clearly established systems are good everyone knows where they are with it and everyone takes a piece of the pie, says Chaplin. But providing a solution that really does meet a payment community or corridors specific needs will count increasingly. A payment mechanism must be easily accessible at both sending and receiving end.
Knowing where the corridor ends
The market must be able to cater for different preferences at each end of each payment corridor, and that as the preferences differ according to the chain, so the importance of interoperability that can be tailored to each corridor becomes apparent.
Walravens says: Choice is key, thus the scale to provide that choice matters. She says that one of the most popular aspects of the Swift platform is the member directory that allows members to see each others offerings and thus select the most suitable partner when setting up payments.
She explains: Remittances still tend to be from developed countries to developing countries. For example in the US those on the platform are mainly money operators not banks. We also have a number of foreign exchange houses in Dubai. In Latin America, meanwhile, its mainly banks because they know that if they can capture some one on the receiving end of a transfer then they are also likely to be able to cross sell a whole range of banking products. We are also looking to Africa and expect that our first mobile customers will come from there.
But although the developed country to developing country sector is by far the biggest sector by volume, margins are low and the established global players face a constant challenge from specific point to point solutions that deal only with their particular niche and thus offer the specialised service that makes for customer retention. In the UK transferring money to Pakistan is one example of this. Hawala, an informal value transfer system located in the Middle East, Africa and South Asia is another. It is basically a parallel system that exists outside of traditional banking or financial channels.
Chaplin says: Distinct community offerings are unbeatable. Hawala, for example, is totally unregulated, but serves its users better than any regulated system could and is thus unbeatable.
Chaplin also cites the needs of small or micro businesses, as well as P2P remittances within large countries like India as needing individual attention from providers.
Clearly even with the global reach to capture newer corridors there is never going to be a one size fits all method of transfer. In particular transfer recipients tend to be less able to use banking services that are standard in the west and so need to be able to easily access monies sent by another method. This is something that has been particularly well articulated by the MasterCard/Western Union tie up as well as Visa which has looked specifically to position itself as a market leader for the emergent mobile transfer market.
P2P and bank customer acquisition
According to MasterCard, an estimated 2.5bn adults worldwide are financially underserved, and within the US, more than a quarter of the adult population is excluded from the financial mainstream. It says that transfers onto prepaid cards are essential for bridging the gap.
In the Middle East a lot of payments are made in cash and to get that into a banking system and sent home to Asia and withdrawn from a bank there is no easy feat. There have been huge government initiatives in the Middle East to get prepaid accounts up and running and thus bring that part of the economy into the system and regulated. The same applies in Africa where there is not a huge banking network and few cash machines- thus systems that suit distinct communities emerge such as M PESA in Kenya that is a virtual system underneath but allows the recipient to get hold of cash via a mobile network.
The idea is clearly inclusion and obviously inclusion means greater potential market share.
The Visa strategy for example, is to drive inclusion through a mix of banks, prepaids and mobiles all able to leverage the Visa brand. Thus applied to mobile, the Visa/ Fundamo offering will aim to be better than a local offering of (presumably) limited scale, reach and interoperability. Instead the platform will offer better functionality and reliability through Africa, Asia and Latin America through Visas brand and Fundamo has more than 50 active mobile financial services deployments across more than 40 countries, including 27 countries in Africa, Asia and the Middle East. The potential is to reach more than 180m consumers with mobile financial services. Tie ups like this are an obvious way to connect billions of unbanked and under-banked consumers to each other and to the global economy.
Visa has also moved to ensure that it can also work well with banks, cards of all descriptions and other money transfer agents. The firm has repeatedly stated that its vision is to be able to have any transaction over any device.
And Walravens says: Mobile payments are a huge driver for growth and all providers recognise this. We are certainly looking to include supervised mobile networks as well as the more traditional ones.
Other key factors such as cost, trust and instancy will also come into play as larger networks compete with each other and with small corridor specific providers for a piece of the action. For example the Swift offering gives three options for delivery time; 2 business days, 4 hours and 15 minutes. Real time will soon be added.
Chaplin thinks that the faster payments solution, available for free in the UK, will need to be expanded cross-border if banks hope to retain customers. Theres no need for it to become a chargeable service as soon as a payment becomes cross-border, he says.
And although established brands may have trust and better awareness than smaller ones, remaining competitive on price will take on increasing importance as senders and receivers become more aware of the underlying systems and thus their options and take control. And in fact big is not always better for some brands originating from credit like MasterCard and Visa may well have their work cut out in countries unused to credit or credit averse even if the actual offering is over prepaid and /or mobile and has nothing to do with credit.
Chaplin says: The product architecture plus cost and trust should all combine to make a solution tailored to a particular communitys needs. Covering 80% of needs is not enough. It is about having all channels open and being truly interoperable and recognising where x is good and where y will work.
