Rupert Shaw is the chief commercial officer at Ireland-based Ding, a mobile top-up transfer company
As we adjust to a new-normal - in limbo between full lockdowns and a post-pandemic future - we find ourselves living our lives increasingly online – everything from food ordering and delivery, to sourcing news and sourcing financial products and services. On this International Day of Family Remittance, while it is certainly being spent under unprecedented conditions, it is hard not to think how the world has changed and that many of these changes may be here to stay - not least of which is the digitisation of payments.
While the shift into digital-first pre-dates the pandemic for many of us, the remainder are now flocking to this medium out of necessity to live, work and support families through money remittance or other forms of micro-value transfer such as mobile top-up via an app or online medium. The pandemic, as it closed bricks and mortar stores around the world, made the traditional way of sending and receiving money more difficult - pushing remitters online in greater numbers.
While remittances remain the lifeblood of communities around the world – the UN reports that the market directly involves 200 million migrant workers, half of them women, and their 800 million family members back home - signs are inflows will be significantly affected this year. In the UAE alone, more than $10 billion is transferred annually in remittances. These flows, on average, make up 60 per cent of recipients’ family income; in the eight largest receiving countries, they are the sole source of cash for about a fifth of households, according to the UN.
Our own research supports the continuing demand for sending remittances among diaspora workers to support loved ones - in a recent survey we found more than 85 per cent of our customers, who send mobile top-up, also send money remittance to family – more than half citing they do it at least once a month, with 20 per cent sending as often as once a week.
The pandemic has shown the potential benefits of transacting online to a new audience, and appetite has never been greater for financial technology (fintech) products which make sending remittances and transacting online easier, quicker and cheaper. The move to digital providers could mean cheaper cash transfers for a demographic which has been hard hit by this pandemic - with both senders and receivers being financially affected. Neobanks, or wholly digital banks, such as UK-based Monzo and Revolut or soon to be launched Jingle Pay in the UAE, and online money remittance operators are finding huge demand for their products and services. Inflows to these businesses in recent months have been significant.
Our own research supports this with 40 per cent surveyed saying they now had an online bank account. Of those who did not currently have an online account almost half surveyed said that they are now considering opening an account with a digital bank. With more than 70 per cent citing the reason for this anticipated action is that they like the idea of using one app, or provider, to fulfill all their needs – such as banking, bill payment, money transfer, mobile top-up.
Undoubtedly this is the way of the future, and neobanks are changing the face of the global banking system and providing customers with a proliferation of services beyond those of traditional banking - such as seamless bill splitting, spending breakdowns and budget trackers etc., and all within a sleek user interface. As well as international remittance companies such as Remitly and TransferWise and recently launched Hubpay in the UAE – who are helping to make sending money more cost effective and affordable - are seeing growth rates of more than 40 per cent during the pandemic.
A Clean Slate
So what is making them so popular? Aside from representing a cost-saving, being built from the ground up with user experience front-of-mind has enabled these entities to be more flexible and inclusive than incumbents. For instance, it only takes 28 clicks to create and activate a Revolut account. This agility and accessibility helps neobanks reach underserved customer segments – delivering services that diaspora workers for example, value greatly. Importantly, they aim to outperform banks on customer service, products and margin to bring a wider, more compelling customer-first offering to market. They also start with a streamlined product offering before evolving into further offerings like international money transfer.
Neobanks can go where the customer needs them to go – becoming more of a one stop shop offering mobile accounts and mobile wallets at the click of a button. Our own research has shown that 72 per cent of customers prefer a one stop shop, or a super app approach, for their financial services. It makes sense and helps customers streamline their lives. With Revolut, you can transfer money instantly, buy your favourite shares, or get advice on spending and savings – all from your armchair for little to no fee – what’s not to like? This disruptive approach represents a win-win for the customer and a much-needed evolution for the world of finance.
Like neobanks, money remittance companies around the world have observed a marked increase in money flows in recent months. Research has shown that the current pandemic has precipitated a wholesale shift to digital solutions. Our recent research into remittance habits among our customers supports this – with a whopping 72 per cent saying they now send their remittances to family and friends online. This is a marked increase from previously noted behaviour where the majority chose a more traditional cash transaction. In countries including the Philippines, Ghana, and Brazil the shift to mobile money, online airtime top-up, and online bank transfers has increased significantly since the lockdown began.
Here at Ding, we have witnessed a sizeable drive to our online mobile top-up service and customers are reporting the same trend. Our online platform has seen growth in excess of 50 per cent compared to the same period in 2019. People who need to support loved ones with money, or other micro-value transfers such as mobile top-up or bill payment but don’t want to put themselves at risk by leaving their homes have been seeking out digital methods.
End of Cash
While some customers may eventually return to cash as their preferred method of payment for goods and services, or a more manual approach to banking and money transfer after the pandemic passes, the coronavirus may have accelerated a shift to digital that is likely to persist for a large majority of the converted. The demise of cash is real and happening faster than foreseen.
Fintech is providing real, viable and more affordable options for money remitters, to continue to be the lifeblood for communities all around the world.