Roar Bjaerum, SVP Head of Financial Services, Telenor
Michael Kent, CEO, Azimo
Elmer (Jojo) M. Malolos, CEO, Wing Cambodia
Carlo Corazza, Senior Payment Systems and Remittances Specialist, World Bank Group
Leon Isaacs, CEO, Developing Markets Associates (DMA)
Digital technologies are expanding throughout the world, particularly in Asia-Pacific. Innovation is opening new avenues for remittance transfers and pushing digital money into a traditionally cash-based business. While these changes encourage greater financial inclusion, they also come with unique challenges.
Although new technologies are showing tremendous potential, old hindrances remain. Cross-border transactions are not allowed for non-bank financial institutions (NBFI) in many Asia-Pacific countries. Laws and regulations typically lag behind innovation and can sometimes present great barrier to new market players.
While e-money services promise low costs, the start-up expense of building networks or setting up new channels can be significant. These costs are typically passed on to the customer and consequently may dissuade people from using electronic remittances and other digital services.
Customers still prefer to cash out remittances, which can drive up costs and require the presence of agents, point-of-sale (POS) equipment, or additional brick and mortar locations. In addition, customer uptake of new digital applications can be difficult, as users lack financial literacy and often distrust what they do not understand. Physical cash and in-person transactions, even with unregulated vendors, still “feel” safer to many people.
While there are many promising innovations in remittance market, success stories of technological driven innovations remain scarce. Blockchain offers distributed and decentralized ledgers that provide greater transparency and security; but FSPs are still unsure on how best to utilise this technology. Mobile wallet reduces the need to carry money; but there will need to be more participating employers and vendors to drive digital adoption and make transactions truly cashless. Consumer-to-Business (C2B) models allow customers to specify their needs and various companies to compete to fulfill that needs; but greater financial literacy will be required before these models become widespread.
Many technological solutions already exist,. In this regard, rather than developing their own digital solutions, MTOs and other FSPs should look to partner with digital innovators. This model of partnership will not only help to lower the barriers to entry and enable the partners to leverage on each other’s strengths but may also result in more affordable services to benefit customers.
Business and government have a key role in pushing electronic money. Employers can pay workers electronically, vendors can accept and incentivize digital payments, and governments can support electronic accounts for all citizens. These steps would also help improve financial literacy.
In turn, the public sector can encourage innovation. Legislation can allow non-bank FSPs to participate in the market, open up cross-border transactions, and balance risks and opportunities by ensuring new laws are compatible with new technologies. Governments can ultimately educate the public on the safety and convenience of digital money.