Where is the remittance industry headed in 10 years’ time? The answer is simple. It is heading online and, specifically, it is heading mobile.
This should hardly be earth shattering news. The whole world is moving towards mobile for almost every aspect of day-to-day life, including digital commerce.
Figures issued last month show that mobile commerce is growing 300% faster than ecommerce. And this growth is a global phenomenon. The ability to shop, bank, pay bills and book travel on the go is in keeping with the demands of the increasingly fast paced life in the developed world.
In developing economies, mobile commerce is even more ubiquitous. Smart phones are within the reach of far more people than computers. These devices don’t need Wi-Fi to work and with 3G covering 70% of the global population, digital transactions are within the reach of the many.
So where does this leave the money transfer industry? It leaves them in a position where, slowly, but surely, electronic transactions are becoming a key part of the business model.
Taking the example of Western Union, a look at their 2009 annual report shows them discussing the potential of electronic payments and taking their first, tentative, steps in to the field.
Five years later, this segment is now worth 6% of the total business. Of course, the face-to-face segment is still dominant and represents 91% of the total business. Yet this electronic segment is growing at around 17% year on year.
If this were to continue at the same rate, by 2025 we would see this segment being worth 29% of the business. But this assumes a rate of 17% growth, which will only come to fruition if the industry embrace digital technologies and deliver a great digital experience.
A second key facilitator of this growth rate will be the increasing adoption of global electronic customer verification technologies. Of course customer verification technologies need to work just as well for customers from England as they do for customers from Eritrea and any other key remittance corridors. Biographical database check technologies work well for customers from developed countries such as the UK and North America but are unhelpful for the remittance industry that caters to corridors and nationalities all over the world.
Next generation technologies such as Jumio’s ID document authentication solution provides a universal verification technology that thrives beyond the province database verification And going forward, electronic verification technologies are being mandated for non face-to-face transactions by the EU’s 4th Anti-Money Laundering Directive which came into effect on June 26th this year. With fines for non-compliance with this legislation being at least €5 million, financial service providers, including money transfer businesses, will have to start looking at how technology can enable them to verify identities without impacting on customer experience and transaction times. This, in turn, has the potential to make the experience for customers easier.
The third driver is the convergence of financial services apps on mobile devices. With the demand for mobile money increasing and service providers looking to bring payments together, the likelihood of having full service mobile functionality which can manage all aspects of financial life, including money transfers, on one platform, is increasingly likely.
The opportunities for money transfer providers are clear. In this increasingly digitised global economy, banks, hampered by legacy systems and legacy thinking, will be slow to catch up. If money transfer providers are willing and able to grasp this opportunity and offer full banking facilities to their core demographic, with mobile at its heart, then they have a once in a lifetime opportunity to take the banks on at their own game.