Outward remittances grew significantly by 23.3 per cent to RM40.64 billion last year from RM33 billion in 2017, said Bank Negara Malaysia’s (BNM) Financial Stability and Payment Systems Report 2018.
The central bank had in May last year forecast outward remittances to grow, but only by a single digit given the already high base. In 2017, there was in fact a slight decline in the amount of money sent abroad compared with the preceding year.
The report said the increased offering and use of digital money services business (MSB) services continued to accelerate the migration of remittances to formal channels.
“It is estimated that over RM900 million of total remittances recorded were transactions previously conducted through informal channels, compared with an estimated RM500 million in 2017,” it said.
Reflecting the increasing adoption of technology within the sector, more service providers offered electronic remittance (e-remittance) in 2018. Twenty companies, compared to 17 companies in 2017, provided mobile and web-based remittance services catering to both retail and corporate customers.
According to the report, several providers have also introduced e-remittance for the purpose of trade payments.
Following regulatory changes in November 2017 to allow qualified remittance providers to conduct electronic Know-Your-Customer (eKYC) when on-boarding new individual customers, three e-remittance providers obtained BNM’s approval during the year to implement eKYC processes.
The effective use of regulatory technology to conduct eKYC enables remittance service providers to authenticate identity documents and perform facial recognition of customers remotely, with the ultimate aim of achieving outcomes that are comparable or superior to face-to-face procedures.
“This has had a significant impact in encouraging the wider use of formal remittance channels, by reducing the costs of conducting customer due diligence and improving access in locations where remittance service providers do not have a physical presence,” the report said.
On average, the cost of e-remittance transactions was 2.1 per cent in 2018, lower than the average cost for over-the-counter remittance transactions of 2.9 per cent.
During the year, the retail currency exchange business recorded a turnover of RM79.4 billion versus RM79.2 billion in 2017.
This was supported mainly by sustained demand for common currencies such as the Singapore dollar, US dollar, Chinese renminbi and regional currencies from both inbound and outbound travellers.
In the wholesale segment, a lower turnover of RM13.5 billion was recorded in 2018 compared to RM15.5 billion in 2017, as more currency exchange providers sourced and cleared foreign currencies through banks and other retail currency exchangers.
BNM said in the report that it continued to direct efforts towards educating the public on the importance of dealing only with authorised service providers and the risks of using informal channels.
During 2018, the bank took Project Greenback 2.0 to its second Malaysian champion city, Kota Kinabalu.
Project Greenback 2.0 is an initiative developed by the World Bank aimed at increasing the efficiency and transparency in the remittance market through the use of innovative approaches.
The two-year Greenback 2.0 Kota Kinabalu (GBKK) builds on the success of the first Project Greenback 2.0 in Johor Bahru, and continues the close collaboration between BNM and the World Bank.
Initiatives implemented under the GBKK centred on educating foreign workers on identifying formal MSB channels and promoting the use of e-remittance solutions among individuals and businesses on a wider scale.
The BNM report said over the course of 10 outreach programmes that were conducted from March until December 2018, GBKK reached out to more than 9,000 people covering both foreign and domestic workers.
Under the GBKK, more than 2,400 new users signed up for e-remittance services, with the total transaction value in Kota Kinabalu increasing to RM12.2 million for the period March to December 2018 (49 per cent higher than the value recorded over the same period in 2017).
During the year, the central bank collaborated with the International Fund for Agricultural Development and the World Bank to jointly organise the first Asia-Pacific regional Global Forum on Remittances, Investment and Development 2018 in Kuala Lumpur.
The event culminated in the identification of specific actionable outcomes directly linked to the UN’s 2030 Agenda for Sustainable Development and its Sustainable Development Goals. — Bernama