‘Digital remittances can bring down cost significantly’

An interview with Hamza Islam – Country Director, WorldRemit

Hamza Islam is the Country Director for WorldRemit in Pakistan focusing on growth and expanding WorldRemit’s partnership base. Hamza has more than 8 years of experience primarily in the fintech space and has previously worked with one of the largest mobile financial services players in Pakistan. He specialises in digital financial services and believes that fintechs can play an extremely important role in uplifting living standard of millions of people across the globe.

He believes that Pakistan is one of the largest markets for international remittance and WorldRemit continues to focus on it by expanding its operations. Following are the edited excerpts of a conversation with Country Director, WorldRemit:

BR Research: What do remittance market players compete on - do they compete on rates, speed, availability of outlets, security of transfer, or other services

Hamza Islam: Today, the majority of the money transfer industry in Pakistan is still ‘offline’ – through money transfer agents, friends or relatives or through other third parties such as hawala. Similarly, a large portion of remittances globally are sent offline in cash at high street agents, who may not even be employees of the money transfer company.

For WorldRemit, I would say that what distinguishes us from other players within the remittance space is the mission to support financial inclusion by offering a variety of methods to receive money, with or without a bank account.

For customers sending to Pakistan, where almost 80 percent of the population do not have access to a transaction account, we offer bank transfer, cash pickup, airtime top-up and mobile money. Mobile money enables people to receive money directly to their mobile phones quickly, easily and transparently.

Moreover, unlike other digital upstarts, we genuinely serve the whole world. We operate across 6,500 corridors and 80 percent of our revenue is generated outside the UK. We’re the leading sender of international remittances to mobile money services with access to more than 150 million mobile money accounts worldwide.

Also, we bank on our cashless model on the sending side, which makes us more secure, as it provides a digital footprint to adhere with global compliance requirements. Pre-transaction, our systems analyses countless data points looking for suspicious user behaviour and check users against Know-Your-Customer databases. Our transactions leave a digital audit trail for tracking unusual patterns, spotting potential fraud and ensuring efficient data sourcing to fulfill regulatory requirements.

BRR: What are the prospects of increasing remittances through blockchain channel? Will this channel only divert formal remittance from one channel to another or will it divert informal into formal?

HI: In an industry which remains largely offline with the use of informal channels, we want to use technology to digitise the process and make it easier and cheaper for people to send and receive money. When exploring new payment technologies such as blockchain, our test is to see whether it will make sending money a better experience for the customers.

Blockchain is a technology we will continue to watch; however, we think mobile money is a more attractive solution for people looking to switch from informal to formal channels. This is because mobile money enables recipients to receive money without an internet connection or bank account.

BRR: How can you bring remittance costs down in Pakistan? Which corridor offers the lowest cost?

HI: According to the World Bank, the average global cost of sending money to Pakistan is 5.38 percent. The top five most expensive corridors are Singapore, Canada, Saudi Arabia, Norway and finally Australia. Digital remittances can save both remittance senders and receivers’ time and money as they cut out expensive third parties such as couriers and traditional brick and mortar agents. The overall global cost of remittances is 7 percent but on average, digital remittances cost 4 percent.

BRR: Have you been approached by the SBP survey? What do you think about the survey?

HI: The SBP survey is a fantastic initiative as it has the potential to use feedback to improve financial services for the Pakistani diasporas sending money back home. We are always exploring new ways to make it easier for people to send money back home to their loved ones.

BRR: What is your estimate of the informal remittance market size in Pakistan - can you give a breakup of the estimated informal remittance corridor-wise?

HI: As informal remittances are unrecorded; it is difficult to estimate the volumes sent to Pakistan.

The World Bank estimates that remittances to Pakistan hit an all-time high of over $20 billion in 2018, representing 7 percent of the country’s GDP. Experts estimate that a high volume of these remittances currently go through informal channels including friends, relatives or other non-recorded sources such as hawala.

BRR: Do you have an estimate of average transaction size of formal remittance across the key corridors?

HI: It varies but most of our customers globally tend to send relatively small amounts to cover, for example, health and school fees. They also rely on our service to get their money quickly and securely to recipients often living in remote areas.

A typical customer sending to Pakistan tends to send more per transaction than our average customer. However, those sending to mobile money wallets through our partnership with JazzCash tend to send smaller amounts but more frequently

BRR: Do you have an estimate of the average transaction size of informal remittance across the key corridors?

HI: We do not have access to this data.

BRR: What is your assessment of PRI activities in terms of arranging tie-ups, marketing activities, training the outgoing labour, or awareness campaign?

HI: PRI has played a significant role in increasing formal remittances to Pakistan. This has enabled banks and MTOs to offer lower-cost remittance solutions for customers, which is something we support.

BRR: What do you think of Pakistan Banao Certificate?

HI: Pakistan Banao Certificates provide an extremely attractive investment opportunity for overseas Pakistanis. It will enable the diasporas to invest in the country’s future, and it provides a competitive return on investment. I believe that maintaining investor confidence, transparency, security, simplified digital processes and increasing customer awareness will be critical for the success of the project.

BRR: What are the prospects of digital remittance? What’s the discussion on having a remittance index?

HI: In just less than 20 years, the number of migrants in the world – that is people living in countries other than the one they were born in – has grown by almost 40 percent from 173 million to nearly 250 million. The money those migrants send home has grown even faster, up by 85 percent in the past decade – that’s after even allowing for a dip following the 2008 global economic crisis.

However, of the $700 billion sent every year, the majority are still sent in cash, over the counter or at high street agents. Western Union and MoneyGram – two of the biggest names in the industry – account for less than 20 percent of market share, but a growing share is moving online. As 50 percent of the world’s population now has access to the internet, and with new users coming online every day, we anticipate that the growth of digital remittances will accelerate going forward.

The money migrants send home has been growing exponentially. At this rapid pace of growth, the industry is transforming with new players and new technology constantly entering the market. We support any initiative that facilitates greater transparency and a reliable source of information, which might benefit the customer.