For most of the quarter billion people that make up the global diaspora today, money transfers have always been charged with emotion because they make a better life possible. A quick, safe and cost-effective way of transferring money can ensure that the family’s day to day expenses back home are taken care of, the monthly house mortgage instalment is paid or that money can be deposited into a hospital account urgently for a life-saving surgery for an ageing parent.

Crucial as it is, the process of sending money across borders has been fraught with practical difficulties. Centuries ago, when breadwinners travelled across the seven seas in search of livelihoods, the journey back home would involve sewing gold coins into their garments so the money (and the earner) could make it back safely.

In the 19th century, wire transfers from private operators such as Western Union and bank issued money orders emerged as popular methods to transfer money. Informal systems such as the hawala have existed from yore where the sender pays an agent at his end, who would then instruct an associate in the destination country to pay the intended beneficiary. SWIFT, or Society for Worldwide Interbank Financial Telecommunication, was set up in the second half of the last century enabling financial institutions to facilitate payments seamlessly around the world. However, with the advent of digitisation, swifter options are rapidly emerging as customer favourites.

Click to remit

With rising internet and smartphone penetration, digital remittances, though still only accounting for less than a tenth of all person to person transfers, are fast emerging as the channel of choice for customers. Eliminating the need for expensive agent networks or physical agent locations, digital platforms offer instant and low cost money transfer options.

TransferWise, set up in 2011, is a crowdsourced online money transfer service that carries out currency conversions at market rates without additional margins and charging only a small commission, sending over a billion dollar worth of remittances every month. WorldRemit, also founded at the start of the decade, allows customers to remit from their bank account or by charging their debit or credit card and deliver funds to a bank account, as cash or to a mobile wallet in the destination country within the hour.

Closer to home, Emirates NBD’s DirectRemit has been disrupting the exchange house dominated remittance market in the UAE, providing free 60-second money transfers to the main remittance destinations, with the bank recently also offering customers the option to make instant Eidiya transfers during Eid through the mobile app by simply selecting the receiver’s mobile number.

New technologies such as blockchain and crypto-currencies also aim to provide innovative money transfer solutions by eliminating intermediaries, improved identity management and stronger governance.

Aiding sustainable development

Remittances are an untapped engine for economic development, and also the secret sauce that supports several national economies, according to the World Bank. The Bank estimated that officially recorded remittances to low- and middle-income countries reached US$466 billion in 2017, an increase of 8.5 per cent over the previous year and thrice the official development aid to emerging economies. The UAE figures in the top three remitting countries globally, facilitating over $40 billion of expatriate remittances last year.

Billionaire philanthropist Bill Gates has said that if the transaction cost on remittances worldwide was cut from an average of 10 per cent to 5 per cent, it would unlock $15 billion a year in poor countries. This is recognised under the UN’s Sustainable Development Goals, which aim to reduce transfer cost to 3 per cent by 2030.

About 70 per cent of remittances are used for immediate needs such as food, shelter and health care, according to the UN. The rest is dedicated to future security through better education, savings and investing in assets and income-generating activities. To underscore their importance, the UN also designated June 16 every year as the International Day for Family Remittances.

In an increasingly globalising world, remittance is a key financial service that touches the daily lives of a growing base of customers comprising both remitters and beneficiaries, while also powering sustainable development of the receiving countries. Banks, money transfer providers and digital platforms that provide safe, quick and low-cost mechanisms to enable this important facility will remain close to the wallets and hearts of a wide cross-section of their clients.

— Suvo Sarkar is the Senior Executive Vice President & Group Head — Retail Banking & Wealth Management at Emirates NBD