At the 2016 Mekong Financial Inclusion Forum, Ron Bevacqua, Managing Director of ACCESS Advisory, asked what gaps in local payment systems can be closed by digital services. Juanita Woodward, Singapore Country Director at WorldRemit, said “I think we are at a tipping point with mobile payments. How can you bring down costs from a global average over 7 percent down to 3 percent? Technology is the only way.”
As an example of the need, Ms. Woodward noted that “workers take an hour off work to remit payments from Singapore….” Franchette Chingcuanco-Cardona, Product and Marketing Director for Wing (Cambodia), explained that her money-transfer firm, which is known for its over-the-counter service, just started offering payments via mobile phones.
Irma Cosico, Chief Executive Officer of ASKI Global, added that migrants want control over how the money they send is spent. New technologies allow remittances to be earmarked for groceries or sent directly to pay tuition bills, but this can be expensive.
Echoing the trend of linking remittances with other services, Ms. Chingcuanco-Cardona Franchette said that Wing offers telephone credit top-up in partnership with most telephone companies in Cambodia. Her firm also is looking into rolling out payment cards that can be used for other purchases. One possible strategy is to partner with retailers to offer discounts to people who pay with digital money.
Nitish Narain, MicroSave’s Manager, agreed heartily that there is a need for “incentives for this money to be used in digital format.” This lowers the rate of cashing out, a service that is often troublesome for agents. Recipients that make electronic payments also may able to avoid hassles, such as waiting in line to pay utility bills.
As evidence of the need for client education, Mr. Narain cited the example of countries in the Persian Gulf that required employers use electronic money to pay migrants, who then went right to automated tellers to withdraw cash to hand-carry to traditional money transfer offices. “People don’t want to change the way they have been transacting for years,” he said, so “how can you leverage the happiness of ‘cash in hand’ to encourage [new] behaviors?” For example, when a customer gets an SMS [text message] saying she has received money, she could get an offer to buy insurance right then.
Regarding financial education, Ms. Cosico said “it takes time…. They like the feeling of holding the cash before they send it. It’s psychological.” She added that ASKI trains both workers, who send remittances, and the families that receive them. “We are customizing our learning materials. The National University of Singapore reviews [and certifies this] material.” Ms. Chingcuanco-Cardona agreed that “it really takes a long time. It [must be] a continuous process. If not, they will forget about it.”
Ms. Woodward described a website that Developing Markets Associates is building to give migrants real-time data from a range of providers on the cost of remittances – both fees and foreign exchange costs. Government agencies have already expressed interest in piggy-backing on the site to deliver non-financial information to migrants.
Ms. Cosico described a loan product that ASKI has designed expressly for migrants and their families. The proceeds go to the home-country family, however repayments are made by the migrant. These repayments are scheduled on a monthly basis to correspond with migrants’ typical pay interval. After the initial loan is settled, future loan cycles are repaid from the proceeds of the home-country enterprise. At a maximum size of USD 2,000, the credit is larger than ASKI’s other loans, but the interest rate is the same: 3 percent per month on a declining basis. So far, 200 enterprises have been launched with this product. Through his firm, ACCESS Advisory, Mr. Bevacqua stated that he has seen many migrant-funded businesses fail. In contrast, ASKI’s review of the business plan during the loan underwriting process should increase the likelihood of success.
On the topic of specialized products for remittance users, Mr. Bevacqua asked about those that target women. Ms. Chingcuanco-Cardona said nearly two thirds of Wing customers are women, adding “women are more entrepreneurial. They are the ones looking into possible business opportunities.” Mr. Narain said that women send more of their money home and that “health and education are the two sectors where women like the money to be spent.” In contrast, “men like to invest in assets like land… [so] the opportunity is a way to have the money built up into a larger amount that can be used for a large purchase.” One challenge to be overcome, however, is that savings accounts sometimes are unattractive due to low interest rates.
Ms. Woodward went on to describe the B-Kash service, which she reports has engaged 25 percent of the population of Bangladesh in moving USD 50 million per day, comprising 8 percent of mobile money users worldwide. She attributed this success partly to interoperability with four phone companies, the large number of participating agents and low pricing for small transactions. The goal from the start was to prioritize pricing clarity and hence transparency regarding the amount of money that the recipient receives. Building on this success, employers are starting to pay people directly into mobile accounts. In many countries, a major driver behind the establishment of creative services related to remittances has been the increasing flexibility of regulators over time, an observation that was met with nods from the entire panel.
Ms. Woodward argued that “people don’t need banks; they need banking. In order to keep costs down, we’ll continue to see things go digital.” On the other hand, Mr. Narain surmised that as cash has co-existed with payment cards long-term, MFIs will continue to co-exist with mobile network operators that offer financial services.
In anticipation of the recently announced Asia-Pacific Financial Inclusion Forum, which will be held in Hanoi, Viet Nam, on March 21 and March 22, 2017, MicroCapital is publishing this story as part of a series from the Banking with the Poor Network‘s Mekong Financial Inclusion Forum, which was held in July 2016. The Foundation for Development Cooperation engaged MicroCapital to assist in documenting the event.
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