Remittance Industry in 2021

Over 12 years’ experience in Banking, Mobile Financial Services and FinTech, he started his career in consumer Banking and then moved to Mobile Money where he managed retail agent networks, international remittances, and contactless payments in Sri Lanka.

siliconindia questions Ruzan on remittance industry in India and its future.

How would you term the current scenario of the remittance industry in India?
India's remittance industry is at an interesting point in many ways. With the global pandemic, there have been challenges that have impacted so many Indian migrants and their loved ones back in India. To list a few, job losses, a decline in earnings of migrants, lockdowns imposed therefore controlled/ restricted movement for people in both send markets and in India. The positive is that there has been a significant uptick in the adoption of digital payments by customers, which is a very healthy development for the digital remittance industry, as a whole.

What is the scope for digital remittance companies in India in 2021 and beyond?
-Focus on customer acquisition (Shifting form traditional methods to digital)
-Create value to those customers so that they stick to digital channels (Talk about our Bill payment service to India if we are allowed to)
-Build ways to connect/support payment infrastructure built in India to make remittances faster cheaper and secure

People are speedily shifting towards digital payments, how do you see this trend evolving?
Due to the pandemic, the adoption of digital payments has been forced upon, so people are becoming more aware of the benefits of digital payments and we are seeing they are really embracing it, which is good. The shift to digital is occurring in different forms in various parts of the world. Either by people using Neo Banking services, using mobile wallets, payment apps or in some cases they are being assisted by agents who have access to digital channels. The benefit of these different models is it builds the confidence in the minds of people step by step, that digital payment services are safe, and convenient.

In India's case, it is not too dissimilar. Be it UPI based payment apps or Adhar Enabled Payment System (AePS) services all of these efforts support people to transact digitally and further breaks down the misconceptions and the barriers of using digital payments as opposed to the offline providers. Needless to say, like many tech-based offerings it takes time for customers to have the trust and know how to shift to digital. But with the initial challenges being addressed (Biometric ID and Bank accounts) the adoption rates are occurring at a more rapid pace.

What will be the trends to look-out for in 2021?
The trend which has occurred more so this year, than previous years is that people will continue to shift towards using formal channels of remittances. It is already happening on a large scale in Pakistan, Bangladesh and Nepal with record numbers utilising the formal remittance channels over the informal ones. Despite the pandemic having a devastating impact on world economies, the digital remittance industry as a whole will continue to grow, and we will see this more as countries restart their economies, and as a result the availability of jobs will increase.

How secure are digital remittances? What should be the minimum threshold of technology investment that the industry must make to ensure the sector stays safe from online frauds and hacking scare?
Digital remittances have proven that it is a more secure and convenient channel for customers to send their money compared to the informal channels. This is because the sender and recipient own the transaction and they initiate it compared to the informal and offline channels where there is a 3rd party involved. Factors such as speed of delivery, transparency and reduced costs (for the sender) has further strengthened the case for customers to use digital remittances

How important is technology for the remittance industry in unprecedented times like these? How is it benefitting the industry?
At times of great crisis, like the current global COVID-19 pandemic, online fraud cases increase and unfortunately many people can shy away from using digital channels to send their money abroad. The need for alternatives to offline, agent-based money transfers is growing in large part due to fraud risks, high costs and inconvenience. Consider the challenges in this process – you stand in line at an agent store, fill out paper forms and hand over your payment in cash. The potential for human error is vast and it takes months before the paper trail is put together and potential fraud can be investigated. Online money transfers can mitigate against some of the risks involved with cash-based remittances. The electronic footprint online transfers leave acts as a strong deterrent to criminal groups. Beyond fraud, online money transfers can improve speed and convenience for users, as well as lowering costs. Technology plays a big role in the remittance industry, very importantly it enables payments to be delivered fast and securely, with transparency. With the pandemic being the catalyst, customers are adopting digital payment alternate offline channels, at a rapid rate, compared to pre-COVID19 times.

What are the challenges in the remittance industry worldwide and also India as a separate market?
The two main challenges for the remittance market is economic downturn in send countries, where migrants have moved to for job opportunities. As a result job losses occur, which in turn impacts the ability or amount of money that can be sent back home. The other ongoing challenge is the number of fraudulent activities and scams that ensue within the remittance industry. Compliance is an inherent part of our industry so it is important to invest the time and capital in developing a sophisticated model with multiple stages of identity checks, to combat fraudulent behaviour.

Could you throw some light on the changing landscape of payments & remittances led by FinTech companies globally and in India in particular?
FinTechs across the world started small with trying to eliminate inefficiencies in different processes within financial services focusing on one service at a time. Payments is an area which adaption took place fast and then remittances started to shift to digital. Now FinTechs who succeeded in doing that has expanded its offering and building comprehensive solutions in the form of either Neo Banks or Super Apps.

In India’s case, this is no different, there are large number of FinTechs serving different customer segments in payments and remittances. They are backed by strong tech infrastructure too. Digital remittances to India will continue to grow as discussions of a UPI like model being replicated in other countries.

And what this does overall is:
oImprove financial literacy
oHelp financial inclusion
oImprove efficiency in payments and remittances
oSave money for migrants
oMake payments simpler and borderless