In the booming global remittances market, banks can capitalise on their strengths in global payments and harness new banking products and technology.
This is true whether they decide to compete against money transfer organisations (MTOs) and exchange houses in banked-to-banked transactions or partner with them on the sending side. By leveraging Internet service and distribution capabilities, the low-cost infrastructure afforded by reloadable prepaid cards and mobile technologies, as well as their access to superior foreign exchange (F/X) rates, banks can gain share.
As remittance pioneers, MTOs built significant infrastructure on both the sending and receiving sides of key remittance routes (called corridors) in response to consumer needs.
On the sending side, MTOs provide convenience, payment assurance, and multiple language capabilities; on the receiving side, they made it possible for clients to receive money in places where banks simply didn’t exist. The increase in banked consumers reduces the importance of MTOs’ distribution network, formerly their great advantage on the receiving side. On the sending side, the advent of the Internet and innovative bank-sponsored products, such as general purpose reloadable prepaid cards, mitigate MTOs’ advantages, or at least make banks attractive partners for MTOs. These technology advances will not only allow banks to solidify their advantage with white-collar workers, who are mostly banked, but to capture share with blue-collar workers, who (even if banked) tend to remit through MTOs/exchange houses.
1. MasterCard research conducted by Synovate, 2009.