Last week was an important week for the payments industry in the UK, with the Global Money Transfer Summit 2015 excellently organised by IAMTN followed by the quarterly AUKPI conference. The contrast between the two events was striking and undoubtedly reflects the differences between the types/sizes of business at each event.
GMTS seemed to crystallise around the medium-to-long term future and whether cash based or digital remittances will win out. There were more detailed discussions around crypto-currency and blockchain and it is clear that whilst understanding of these technologies is growing they are at an embryonic stage for remittance companies in their consideration of this area. There were some lively debates and as ever, no clear conclusions.
The AUKPI was much more focused on the short term and was generally very concerned that things seem to be getting worse, not better, for smaller/medium payment Institutions. The AUKPI recently conducted a survey and received a creditable 71 responses. Of the 41 companies that had applied to gain a bank account in the last two and half years not one had been successful. To me the only real solution is for governments to mandate banks to offer a basic business account – leaving it to the market is clearly not working.
Ahead of the meeting a request was made by IAMTN to all speakers to provide their views on how the remittances industry might look in 2025 which I thought was a great idea. I thought that for the first in a series of blogs that I will be writing on the state of payments and financial inclusion, I would share my submission to IAMTN. I expect many of you reading this will have a very different view on where you think the remittances market is heading and if the discussion this question generated at the conference is anything to go by, I expect and look forward to receiving some interesting views in response to this.
Predictions on where the remittances market is headed in 2025
1. In most major send markets there will not be any sending agent locations – nearly all transactions will be originated remotely and electronically;
2. The receiving markets will be evenly split between cash out and electronic;
3. Remittance costs will be less than 3% of face value;
4. There will be a limited number of remittance companies – banks and mobile operators will also offer remittances and compete strongly;
5. Companies offering remittances will be multi-service vendors and remittances will not be their main revenue stream;
6. There will be a limited number of wholesalers/hub type operators who will dominate the market place;
7. The average transaction size will halve as the costs come down;
8. There will still be challenges with banks offering accounts to non-bank remittance providers – however, at least five legacy remittance businesses will have become banks and at least two will bank the remaining remittance customers;
9. It will be impossible to make remittance transactions without ID of some sort;
10.Senders will be paying bills for all major outgoings on behalf of beneficiaries.
Overall I expect to see the continued rise of technology changing the way people send money overseas. One thing I will continue to watch closely is the role (if any) cryptocurrencies will play in bringing the price down further and whether blockchain technology will be as transformative as many expect it to be.
I will be sharing my views on different subjects in a short blog over the coming months and look forward to hopefully having a few of you read it and provide comments!