The 10 Most Important Issues of the International Money Transfer
Total Page：16
File Type：pdf, Size：1020Kb
The 10 Most Important Issues of the TOP International Money Transfer & Payments Industry for 2015 Hugo Cuevas-Mohr Mohr World Consulting Here, once again, are the ten most important issues faced by the International Money Transfer & Payments (IMT&P) Industry in 2015. I put this together as a way of reflecting on the significant issues of 2015 as well as to analyze trends for 2016. These issues are not listed in order of importance. They are based on my own personal opinions and ideas which have been discussed with colleagues in the firm and within the industry. If I’ve missed something of importance or if you have comments, please do so via LinkedIn or you may contact me directly. Click on the hyperlinks to see additional info. Although the volume of IMT&Ps continues to increase, the % increase YTY has 1 slowed down. U.S. and Western Europe are seeing an increase in overall volume. In 2015, worldwide remittance flows are estimated to have exceeded $601 billion. Bank discontinuance and de-risking is still a major problem industry-wide. However, 2 we believe there has been a slight shift in the market with small banks opening accounts to industry firms amidst higher costs and strict compliance requirements. Prices of industry services to the public have been fairly stable during the year with a 3 slight upward trend, even though competition in every channel is fierce, more so in the exchange spread than in the fees. U.S. dollar valuation has influenced markets. Mobile money services continue to expand across the developing world with new 4 cross-border functionalities, systems integrations, partnerships, and regulatory advances for the industry. We’ve seen high domestic use of mobile transfer spreads. Digital IMT&Ps are continuing to increase their market share as investors and 5 bankers favor online/mobile channels. Adoption of these channels is creating a digital divide while fraud and merchant services are major issues being faced. The digital race heats up in the U.S. with the entrance of WorldRemit and 6 TransferWise into the U.S., while Western Union opens online channels in Europe. Investors keep money flowing, funding these companies as time for IPOs loom. It was a good year for mergers & acquisitions (M&As) in the IMTC&P Industry, with 7 the most notable news coming from the U.S: the $890M deal for the purchase of XOOM by PayPal. Similarly, Qiwi announced the acquisition of Contact and Rapida. Middle East, Oil, War, and Remittances: The continued decline in the price of oil is 8 affecting remittances. This trend might worsen in 2016 and beyond. The refugee crisis, as a result of war, will impact the market in the years to come. The rise of P2B and B2B services in the industry is making the “payments” side of the 9 International Money Transfer & Payments Industry more dynamic and more important, overall, with new services, new entrants, and new offerings. Bitcoin, as a remittance tool, is now being used by a few pioneer firms, mostly as a 10 settlement mechanism, while the overall acceptance of the blockchain protocol as a significant invention has shifted the rhetoric about VCs for the better. © 2016 - Mohr World Consulting – www.mohr.world You can use this top 10 list, post it, blog it, as long as you cite the author and the source Although the volume of IMT&Ps continues to increase, the percentage increase YTY 1 1 has slowed down. According to the World Bank and Knomad, in their latest Brief #25, the growth rate of remittances to developing countries is projected to fall from 3.3% in 2014 to 2% in 2015 (down from 7% in 2010-2013). The slower growth rate is not uniform at all since the sharp decrease in remittances from Russia and slower growth in the Middle East significantly affected the global average. Both Latin America and Caribbean, as well as South Asia had increases of 5% or more. It must be noted – and discussed in Issue #3 – that the valuation effects of the U.S. dollar appreciation against the currencies of remittance-source countries, especially the ruble, influence the impact of this slower growth. The continuing recovery in the U.S. and a modest acceleration of economic activity in Western Europe are producing a general increase in overall volume. Most U.S. money transmitters have had YTY growth between 5% and 15% in 2015 with a modest growth in their European operations. The mood in November at the IMTC WORLD 2015, in Miami, was upbeat, as many corridors showed a volume increase. Coupled with fairly stable prices and competition mostly based in the Forex spread, the traditional MTOs have been more optimistic in 2015 than in previous years. For 2016-2018 it is estimated that Europe and Central Asia will see a large rebound if the Russian economy stabilizes. In 2015, worldwide remittance flows have been estimated to have exceeded $601 billion while developing countries received an estimated $435 billion, with East Asia, the Pacific, and South Asia each receiving around $130 billion, while LAT received close to 7$0 billion. The $453 billion is nearly three times the amount of official development assistance. But, as we always state, the true size of the IMT&Ps market, including the unrecorded flows through formal and informal channels, is without a doubt, considerably larger. TOP ↑ Bank discontinuance and de-risking of MSBs/MTOs/money transmitters is still a major 2 global problem industry-wide, but we think there has been a slight shift in the discussion with reports, regulations, and statements being published that gives us a sense of the issue moving forward; the small positive steps might seem irrelevant to a number of companies caught with limited or no banking relationships. The World Bank report entitled, “Report on the G20 Survey on De-Risking Activities in the Remittance Market,” published in November 2015, must be read by everyone. In total, 13 governments, 25 banks, and 82 MTOs completed the survey and, despite the relatively low response rates (mostly on the banks’ side), the MTOs that responded, in terms of market share of the overall remittance market, can be considered quite substantial. One key statement in the report is the fact that, “Neither banks nor MTOs cited AML/CFT- related violations or sanctions by MTOs as one of the top five reasons for account closures.” In the European case the Revised Directive on Payment Services (PSD2), published in November 2015, contains a very important regulation that cautions banks to provide “. payment accounts services on an objective, non-discriminatory and proportionate basis.” It adds that, “Such access shall be sufficiently extensive as to allow payment institutions to provide payment services in an unhindered and efficient manner.” (Check chapters 35 and 36.) At IMTC WORLD 2015 several speakers provided opinions and insights, from FinCEN Deputy Director, Jamal El-Hindi, to a panel moderated By Leon Isaacs, Antonio Selas major successes in Spain, and comments by remittance expert Manuel Orozco (who subsequently published in December 2015, his document entitled, “Bank Account Closures: Current Trends and Implications for Family Remittances.” There is also some evidence that some smaller banks are opening accounts to industry firms amidst higher costs and strict compliance requirements. TOP ↑ © 2016 - Mohr World Consulting – www.mohr.world You can use this top 10 list, post it, blog it, as long as you cite the author and the source Price to the public of industry services have been fairly stable during the year with a 3 slight upward trend even though competition in every channel is fierce, more so in the exchange spread than in the fees. According to Remittance Prices Worldwide (RPW), the global average cost of sending remittances (including all fees and charges) was 7.68% in 2Q 2015, remaining stable (1Q 2015 was 7.72%). The Migration and Development Brief 25, published by The World Bank and KNOMAD in October 2015, included this chart which shows the relative stability of the cost of sending $200 USD in 2014 and 2015. Dollar valuation impacts the cost of remittances, as was discussed in the IMTC WORLD roundtables. The Brief also gives us a detailed analysis on the effects of dollar valuation and its impact on remittances, “The impact of slow growth on remittance outflows measured in dollars is compounded by the valuation effects of the U.S. dollar appreciation against the currencies of remittance-source countries, especially the ruble.” When the exchange rate in the paying country rises continuously, the exchange rate price competition subsides and volume sent increases. The Brief further ads that Euro Depreciation (around 20%) contributed to the projected two percentage point decline in the growth rate of remittances in dollar terms to the Middle East and North Africa, where countries receive substantial remittances from Europe. Euro depreciation also affected remittances to Latin America and the Caribbean and to Sub- Saharan Africa, to a more limited extent. It is interesting that remittances to Albania fell by 2.5% and to Morocco by 13.9%, while remittances to Romania rose by 1.9%. However, if the euro-dollar exchange rate had remained fixed at the level of 1Q 2014, then remittances would have increased by 21% for Albania, 6.9% for Morocco, and 26.4% for Romania. TOP ↑ Mobile Money Services continue to expand across the developing world with new 4 cross-border functionalities, systems integrations, partnerships, and regulatory advances for the industry. Domestic use of mobile transfer services spreads. The Global Mobile Systems Association (GMSA) reports that mobile money industry continues to expand globally, with more than 250 live mobile money services in nearly 90 countries (263 live deployments and 101 planned deployments.