First it came for our browsers. Then it came for our smartphones. Now, Facebook is coming for our wallets — but not necessarily in a bad way.
Mark Zuckerberg’s social network announced its entry into the money remittance space last month with the news that it would soon let users of its Messenger service send money to other members free of charge. “It’s easy and free,” Facebook said in a statement.
When asked about a time frame for the service’s introduction in the UAE, a company spokesperson tells GN Focus by email, “We will consider adding international markets after we have launched nationwide in the US.”
Remittances are a huge business in the UAE and GCC. According to the World Bank’s estimates, remittances from the UAE touched $29.25 billion (Dh107.4 billion) in 2014. The UN organisation’s report last month, Migration and Remittance Flows: Recent Trends and Outlook, 2013-2016, put the total amount from the GCC at $75 billion for 2012, a 50 per cent increase from 2011.
Little wonder then that for the numerous exchange houses throughout the region, business is booming. “Last year we witnessed a 30 per cent growth in transactions,” says Punoose Mathew, Manager – Business Development, Joyalukkas Exchange.
“This growth in UAE remittances was mainly influenced by the rapid development in activity, especially construction and service industries.”
Mathew’s words chime with an April release from the World Bank, which says factors such as “large-scale construction activities and fiscal expansion in the GCC countries” are supporting inflows into South Asia. In fact, they account for 60 per cent of remittances into the region.
Mathew isn’t particularly concerned about low-cost competition from Facebook either. “From my perspective, the [Facebook] initiative might help with micropayments. However, overseas transfers look to be less promising. The reason being, if such facilities are developed here, then it must be ensured that [they] follow suit in the receiver’s country too. [A Facebook remittance facility] should also be equipped with partners such as regulatory authorities, banks, payment network providers and telecommunication to ensure a smooth and complete process.”
S. Karunakaran, General Manager, Al Rostamani International Exchange, echoes this sentiment: “All money transfer business is required to comply with regulatory requirements and it will be difficult for them to do so, especially for large-value transactions, and it will also be a challenge for both the regulator and the receipt bank, if any, on how these service offers will support their internal compliance requirements.”
Jovie, a 28-year-old nanny from the Philippines, sends home Dh1,800 at the end of every month. She has always remitted through a nearby Al Ansari Exchange. “I have to pay Dh15 each time I send money home,” she says. “It’s cheaper than a bank and I know the money will reach my sister [in the Philippines] the next day.”
When told about Facebook’s free money transfer plans, Jovie, who declined to share her last name, expresses interest but says she will wait to see how it works in practice.
Says Mathew, “When it comes to money, [blue-collar workers] ensure that it reaches their kin at the earliest and are also very particular about comparing financial providers to get the best rate possible.”
Apps at your service
Facebook isn’t the only option for avoiding fees on remitted funds. The TransferWise money transfer app, developed by a London-based start-up, promises to help users avoid hidden banking fees and exchange house charges by cutting out the middle man through a peer-to-peer transaction, providing a means for making an international transfer at the cost of a domestic one.
“In the white-collar world, it’s inherently bad that people are getting screwed by hidden fees, but when you are getting into the remittance end of the market, it is literally about food on the table, so there’s an even deeper moral problem to address,” Joe Cross, General Manager for non-EU countries at TransferWise, told The Guardian earlier this month.
Facebook has held discussions with TransferWise, as well as Azimo and Moni Technologies, which are also London-based start-ups, according to the Financial Times.
No fear here
However, UAE exchange houses aren’t sweating just yet. “There is inevitable change in the industry and we are evolving and growing too,” says Mathew. “The main question is: how quickly can we offer these services, and whether or not we will pioneer at doing so.”
Karunakaran says, “The service provider with a proper IT infrastructure set-up will always have an advantage as the business requires secure set-up and excellent compliance processes.” New players face high set-up and running costs, he adds. “At least for some years to come, the current way of sending [money] will continue, either through a exchange provider or a bank.”
Mathew adds another advantage that Facebook and the growing array of apps may not have: “At the end of the day, we believe financial services require human interaction.”
