Al Ansari Financial Services has sounded an alert about parallel remittance channels impacting licensed FX businesses in the UAE. Image Credit: Shutterstock

Dubai: The UAE's remittance companies continue to face challenges from grey market operators, according to Al Ansari Financial Services. 

"The trends observed in past quarters persist," said the company, which has the biggest share of the UAE market. "Challenges posed by the parallel market in key remittance corridors like India, Egypt, and Pakistan led to a 3 per cent year-on-year decline in remittance income during Q1-24."

The UAE authorities have been targeting and tamping down on unlicensed FX operations. Penalties have been imposed on offenders, but as the Al Ansari statement points out, there are channels that operate.

A top Al Ansari official adds that there are positives coming through. "we're encouraged by several key developments - the parallel market conditions in critical markets have stabilised," said Rashed A. Al Ansari, Group CEO.

Al Ansari's net profit

Al Ansari still recorded a 5.1 per cent increase in first quarter transactions. But net profit for the DFM-listed entity was down 26 per cent. “Net profit declined to Dh98.7 million mainly driven by the expansion in the branch network and the introduction of (UAE) corporate tax,” said the statement.

The company's stock is trading at Dh1.06 on DFM. 

The increased remittance fees implemented in April position us for significant future growth

- Rashed A. Al Ansari of Al Ansari Financial Services

Higher remittance fee

The UAE remittance operators have brought in a fee hike on all transactions done through physical branches, the first such in 5 years. It equates to 15 per cent, or Dh2.5 per transaction.

"The increased remittance fees implemented in April position us for significant future growth," said Al Ansari. "We're confident these initiatives will translate into improved financial performance in the coming quarters." (The company had 259 locations as of end March.) 

More gains from digital

Al Ansari like most of its competition is also targeting more remittance transactions happening through its digital platform. Consumer acceptance of such channels have zoomed in recent quarters, whether that's through the digital options from currency exchange houses, banks, or the likes of e& money, du pay or Astra Tech owned Botim.

"Customers are embracing digital with open arms," says Al Ansari. "Number of transactions on our digital channels surged by a 25 per cent year-on-year during the first quarter of 2024. This growth highlights the success of our user experience strategy, making it clear that our digital solutions are convenient, accessible, and perfectly in tune with customer needs."

According to Mohammad Bitar, Deputy Group CEO, "Our operational efficiency remains high, with a steady EBITDA margin of near 45 per cent even in a rising cost environment.

"It is worth noting that, compared to the previous quarter, we saw a 2.2 per cent increase in operating income. This is a clear sign that the challenge posed by the parallel market is beginning to abate."