Dubai: The booming remittance market in the Middle East and North Africa (Mena) region provides another major opportunity for prepaid card providers, with outbound money flows growing at a cumulative average rate of 12 per cent per year.
A huge chunk of the region’s population regularly sends money to their home countries either through formal or informal channels. It is estimated that the Middle East’s outbound and inbound remittance is worth $340 billion (Dh1.25 trillion) and growing strongly at six per cent cumulative average growth rate (CAGR).
Experts said large sums of money are also being transferred through the hawala system, which is underground and secretive in nature. If this segment is tapped into, it could drive the prepaid growth further.
“Remittance is a major opportunity. Those remittances are currently taking place very often through informal channels that can be debated in terms of safety for the receiver and the sender of the money, and it poses a challenge to regulators simply because those flows are going completely under any type of regulatory scrutiny,” Francesco Burelli, partner at Value Partners, told Gulf News on the sidelines of the Prepaid Summit Middle East 2013 in Dubai.
“You may have any type of illegal behaviour being blended with a lot of pretty legitimate type of transactions from foreign workers sending money home. Prepaid cards offer a way to capture those types of flows in a way that’s cost-effective because there’s an infrastructure already in place,” he added.
Outbound remittance from Mena is the largest in the world, outpacing other major markets such as North America, Western Europe, Southern Europe and Asia. Saudi Arabia generates the biggest outbound flow, with remittance topping $28.5 billion in 2011, up from $16.4 billion in 2007.
For the industry to “exploit” the remittance market, it important to provide a viable, easy-to-use interface that works best for the customer receiving and sending the money.
“It’s a matter of identifying the right type of flows. Depending on the type of channel and demographic of the person receiving the product, it has to be designed in a way that’s easy to use. If you send money to a place where there are not enough bank branches and terminals, you need to have an alternative channel to take the money out,” Burelli explained.
Due to the global economic crisis, the overall growth of prepaid has, however, slowed down in all markets except South America and Asia recently, but experts predict that pre-loaded cards remain the best performing product.
“The growth is slowing down a bit but this is because of the economic scenario. Nonetheless, prepaid is still the highest growing product compared to any other payment product on absolute terms in any geography that we looked into,” Burelli said.
