Singapore to the Philippines: The Money TrainNitin Sumangali |
Remittances present themselves as the soft underbelly for banks seeking to launch a second front to displace cash.Banks have an opportunity to work with governments in developing countries as these countries make efforts to bank a bigger share of their populations. Handled right it could be a win-win for banks and their customers.
In Asia Pacific, for example, much of remittances volume moves through hawala, the ancient, unreliable, completely unquantifiable, and (not coincidentally) absolutely illegal personal transfer of cash money through third-party acquaintances.
In 2009, global remittances stood at $420 billion, with $317 billion, or 75 percent, traveling from developed to developing countries. For example, the influx of blue collar workers into Singapore has created a large demand for providers to handle their remittance of funds back to their families in the Philippines.
The latter received nearly $17 billion in 2008–$378 million from Singapore alone.
This is not just about hawala. In the past, money transfer operators (MTOs) have also taken up a large portion of the remittance market. This is because most migrant workers in Singapore are domestic helpers and entitled to just one day off. This day is usually Sunday and since most banks are closed on Sundays, workers were more likely to turn to an MTO which is open and easy to access.
Thanks to the efforts of the Philippine government, a large proportion of the population is now banked. As a result, bank accounts there received 70 percent of remittances in 2009, compared with only 50 percent in 2005.
Banks can also deposit funds directly on prepaid cards, bypassing the branch network. Consumers in the Philippines gain the convenience of accessing funds anywhere cards are accepted or at an ATM. Bank-to-bank or bank-to-card transfers provide consumers increased security and transparent fee structure compared with MTO or hawala networks, while mobile and web banking applications cut into the service advantages MTOs have. Electronic banking means consumers can send money quickly at any time from anywhere.
Also appears on The Heart of Commerce Blog.