Remit money / Remittance
On international money transfers, banks and pure-play remittance houses are gunning for digital supremacy. Image Credit: Stock image

Dubai: Digital wins when consumers start getting the feeling of convenience – this seems to be what’s happening with remittances in the UAE and Gulf.

A new survey by Visa found 57 per cent of remittance senders in the UAE - and 53 per cent of recipients - state ease of use/convenience as the key reason for their preference. “Saving time for friends and family accessing transferred funds and money being sent safely, privately, and quickly were also key factors,” said Salima Gutieva, Visa’s Vice-President and Country Manager for UAE.

It doesn’t end there - of remittance senders who have not used digital methods, 36 per cent are ‘highly likely’ to use digital transfers in the future. Around 70 per cent of surveyed consumers in UAE use apps to send and receive funds internationally, compared to 53 per cent globally. (The numbers are based on the ‘Money Travels: 2023 Digital Remittances Adoption’ research by Visa.)

Read more

What this means is that physical remittance-focussed outlets need to up their game to have a hold on a steady stream of clients. In this, they could take a few hints to see how UAE brick-and-mortar retailers countered online shopping channels. In recent years, these retailers have focused on offering more in-store experiences and deals when customers come calling.

Remittance companies in the UAE/Gulf have been launching their own digital platforms and apps to counter competition from banks and remittance service providing fintechs.

“While digital remittances may have had a smaller base three years ago, the growth in adoption in the UAE and globally has been rapid,” said Salima.

It’s likely that digital remittances will continue to gain popularity as digital financial services become more mainstream.

- Salima Gutieva, Visa’s Vice-President and Country Manager for UAE

Physical presence

Based on Visa findings, 63 per cent of respondents in the UAE send remittances from a physical location against 70 per cent for digital ways. (The reason behind the still high numbers for physical locations could be that a lot of remitters still use a hybrid model.)

Those who send cheques or money orders by mail account for 8 per cent, while sending cash by mail is done by 9 per cent. And giving money to another person who is traveling to their home country makes up 11 per cent.

Banks vs. remittance houses

“Banks have an edge in terms of brand recognition and trust, and they can capitalize on existing customer relationships to provide personalized services,” said Salima. “On the other hand, pure-play remittance houses may be more agile and focused on delivering a seamless user experience, and may offer lower fees or better exchange rates due to their specialization in remittance services.”

High fees on digital

One factor that can hold back higher digital remittances are the associated fees, with 38 per cent of remittance senders and 35 per cent of receivers suggesting this to be a problem. Additionally, issues with calculating exchange rates are a challenge for 28 per cent of senders and 23 per cent of receivers. “Addressing these pain points can help both banks and pure-play remittance houses improve their services and gain a competitive advantage in digital remittance,” said Salima.

Fintech competition

While banks and standalone remittance companies dominate international transfer, in peer-to-peer transactions fintechs are making headway in markets like the UAE. “It is no surprise that the digital remittance space is becoming increasingly crowded, with banks, remittance houses, and fintechs all vying for a share,” the Visa official added.

“Fintechs are catering to a customer base with lesser fees, faster transactions, and more user-friendly experiences.”