Keeping pace with demand for money

Dubai The UAE's annual personal remittance outflow is an estimated $8 to $10 billion (Dh36.7 billion), but could go up to $15 billion if certain non-individual remittances are included, according to Jean Claude Farah, Senior Vice President for Middle East and Africa of Western Union Financial Services.

Western Union, the 161-year-old financial institution, last month reported revenues of $5.5 billion for 2011, an increase of 6 per cent compared to 2010. In an interview, Jean Claude Farah elaborated his thoughts on the latest trends in money remittance business.

Gulf News: What is the current status of the money remittance business, especially the instant cash segment?

Jean Claude Farah: Growth is coming back. The current year appears to be better than last year. We have started 2012 on a positive note. We are fortunate to be in a growth region. According to the World Bank's migration and development brief — December 2011, officially recorded remittances sent to developing countries reached $351 billion in 2011, up 8 per cent over 2010, registering a quick recovery to the level in 2008.

For the first time since the global financial crisis, remittance flows to all six developing regions rose in 2011. Growth of remittances in 2011 exceeded the World Bank's earlier expectations in four regions, especially in Europe and Central Asia (due to higher outward flows from Russia that benefited from high oil prices) and Sub-Saharan Africa (due to strong south-south flows and weaker currencies in some countries that attracted larger remittances).

Besides, we are witnessing a reverse migration of skilled manpower, especially from weak European economies to stronger economies in North Africa — such as Morocco. So remittance outflow from the Middle East and North Africa is also taking place.

This year we will see a strong growth in the remittance business.

How did the Arab Spring impact the business?

The full impact of the Arab Spring is not yet visible in data. But the crisis in Libya has resulted in mass departures of migrants to their home countries or to neighbouring countries.

On a Western Union level, we were affected like any other businesses. We had to shut down offices for some time in certain areas. However, things moved back to normal and business is coming back to those markets as well.

What is distinctive about our business model is that we operate in almost all countries and territories, no one country outside the US represents more than 6 per cent of our revenues so we have good diversification from a global standpoint.

Being a global company, Western Union employees are from all over the world and some of them have families in the countries that are affected by current political dynamics. Our employees did their best to restore full service in record time.

From the demand draft and tele-graphic transfer to mobile money transfer — the remittance business has shifted to a totally different level. Could you shed some lights on the latest trends in remittance business?

Our research has shown that our consumers want the convenience of sending money via electronic channels like the WWW and mobile phones. This technological innovation not only allows a customer to easily move money from one location to another, but opens our money-transfer services to a whole new generation of customers. This presents companies like Western Union with unique opportunities to reach new segments and new customers by providing financial services across several channels.

We are forming relationships with a variety of organisations around the world, including banks and mobile phone companies, to enable our customers to send and receive money how, where and when they want. We now have over 80 banks signed for account-based money transfer with 44 active, including emirates NBD in the UAE, where the service is currently available online, Absa Bank in South Africa, Scotia Bank in Canada, and Garanti Bank in Turkey. Many of these agreements with banks allow the bank's account holders to send money from their accounts online, from an ATM machine, or from their mobile phones to one of more than 200 countries and territories around the world for cash payout. In addition, in some countries, account holders can choose to receive funds sent via Western Union directly in their accounts, on a mobile phone, or via an ATM.

Could you shed some lights on the challenges that the industry is facing in facilitating the cross border mobile-to-mobile remittances?

This is a new area that is evolving for us. We are entering into an uncharted territory — where we are in a learning curve.

When it comes to remittance within the same country, then there isn't much obstacles when it comes to mobile phone enabled money transfer. However, cross-border money transfer needs proper guidelines and regulation which is yet to be agreed upon by countries. Then the telecom operators and the banks will have to facilitate the remittance by deploying the right technology that will deliver a transparent, secure and safe remittance flow.

However, a lot of these are in the making and will take some time. However, in some countries, mobile remittance is taking place and it is growing fast as mobile subscription is growing very fast worldwide.

If mobile phone-enabled payment gateways start functioning in a large scale, remittance business will change dramatically. This will be the most convenient and fastest mode of remittance that will reach beneficiary in no time.

What would happen to the traditional money exchange houses?

Cash transaction might not disappear altogether. So, there will always be over-the-counter business.

The money remittance service providers will have to change their business processes to accommodate the customers' needs.

Western Union adopted a multichannel strategy to offer our consumers numerous ways to send and receive money. However, let us remember, that for all the technological innovations — online, mobile, ATMs — there is a very large world out there that still operates in cash. And with every transaction — there are two parts. Where the money is sent and where it is picked up. For many consumers sending or receiving money, cash is still king, especially if you are a temporary worker or a family living in rural India. And where cash across borders is at play, few can match Western Union's global capability and network. We payout in 120 currencies, comply with over 100 different reporting requirements, and speak in practically every language of the world.

What are your plans? How are you planning to change your business to match the new realities?

There are two billion people worldwide who are considered under-banked or completely un-banked. Western Union's core remittance business charges to the 200 million who migrate to other countries as well as their families back home. However, all consumers have financial needs. And we plan to utilise our brands, global network and infrastructure to provide more financial services to the underserved over time. This could be in the form of prepaid or stored value or distributing third-party financial and related services throughout our global network.

Last year, we organised our business around three key growth areas: first, global consumer financial services, which include core money transfer; second, new ventures and services, which includes expansion of our electronic channels; and third, business-to-business payments.

We now have a strategic roadmap in place that will allow us to accelerate our businesses over the next several years. In 2012, we will focus on executing against those plans.

We have three main areas of focus this year: Expanding our network and focusing on adding and retaining consumer and consumer money transfer; creating a digital infrastructure to drive our electronic channels business; and growing the B2B business and successfully integrating the Travelex acquisition position. Over time, we want to further increase loyalty by continuing to improve the retail experience with simple, high-quality transactions at the right value.

We want to increase share of wallet by leveraging our consumer database and providing access to new services. And we want to add new consumers through expanding our network with strategic agents and offering adjacent services, such as account-based money transfer, direct-to-bank or card, ATM money transfer and intra-services in key markets. To reach these goals, we will need to invest over time in salespeople, focused marketing and technology.

In 2012, our focus is on accelerating network expansion to reach more consumers through increased global sales resources and more aggressive pursuit of new agents.

Currently in the Middle East and Africa, we are present in 38,400 locations, served by 450 agents and managed by 126 Western Union employees.

We are planning to increase these to 40,000 locations connected by 500 agents. We also plan to increase our account-based money transfer relationships with banks and further expand ATM capabilities.

We need more people to manage the expansion. So, we are now hiring.