This article was conceived after discussing with colleagues in the industry why the payments world has been driven into the Cash vs. Digital dichotomy. My research on cash has been inspired by analyzing the penalization of cash-based industries, such as the money transfer industry by the banking sector, which has resulted in the derisking phenomenon that has hurt the traditional money transfer & remittance industry and their clients, in favor of digital models.
Last week, May 2-5, myself, Hugo Cuevas-Mohr and Olivia Chow, from Yokip Consulting, our partner in the RemTech Awards and The Blockchain Series Coordinator, were in Manila in a round of visits with local authorities, money transfer companies, banks and associations. The main objective was to prepare the program for our coming IMTC ASIA 2018 in Manila in September 19-21. We not only wanted to make everybody aware of the event, but make sure we understood the issues that all the stakeholders in the country found important to discuss at the coming event, to make it relevant for all, local & international participants.
PART ONE: Cash: Is the payments king dying? or is the king creating its own separate kingdom?
Although is not exactly clear how the payments industry will evolve in the near future, we agree that 2018 is likely to be a significant year for the financial services industry: banks, eCommerce, fintechs, payment institutions and other alternative payment providers. We will cover cash first (cash is still king!), then we will discuss the opening of banking rails to NBFIs in some jurisdictions (Europe, US & other countries) and then we will end with a view on fintechs and the blockchain, mostly those engaged in X-Border Payments. We are planning the 3 articles in the following three issues, as we embark in our Blockchain Series event in Sao Paulo on March 21, the European Payment Opportunities Forum on May 16 and the IMTC Forum San Juan in June 5 & 6.
You can download the 9 page PDF file from here: http://bit.ly/future-cash
In my recent visit to Chile, where I traveled to make sure the country would be the best site for our 2019 IMC LATAM conference, I was very surprised by the large number of migrants entering the country, the growing number of agents & branches of established money transfer companies such as AFEX, MORE Money Transfers, RIA Money Transfers, Western Union, Latin, MoneyGram, Argenper, Peru Services and the opening of new companies entering the outbound remittance market.
Encuentra este artículo en español en PDF para bajarle aquí: DOWNLOAD
The news  January 2nd didn’t come as a surprise for the industry as President Trump has criticized China for its trade and currency policies and its “America First” slogan has been the damocle’s sword hanging over the deal. We analyzed the deal in a past blog explaining the US Committee on Foreign Investment (CFIUS) involvement in these kinds of deals. It is not the first time MoneyGram is not allowed to be bought. When Western Union was trying to buy it, the deal was stopped to prevent the creation of a monopoly.
 U.S. blocks MoneyGram sale to China’s Ant Financial on national security concerns http://reut.rs/2DkwctP
In a recent Press Release, the Money Services Business Association (MSBA) – the US trade association that represents the growing non-bank money services industry, announced the formation of a new Board of Directors, a new Chairman of the Board and new Board members. The MSBA named Viamericas Corporation CEO Paul Dwyer as its new Chairman, succeeding Alberto Laureano, CEO of Barri Financial Group.
For IMTC WORLD in Miami this past November, I decided to present my estimates on the size of the international Money Transfer and X-Border Payments industry, coming to a figure of approximately 1,025 billion USD, based on private communications with industry players and my own analysis (INFOGRAPHIC). The estimate starts from the 600B estimated by the World Bank on Remittance Volumes and adds estimates on unreported remittances, x-border money transfers that don’t fall in the strict “remittance” category (see definition below) and B2B & B2C transfers handled by the industry, by companies using Hawala-Type Methods and newcomers using VCs . If you want some detail about how this estimate was calculated, please read below or download this PDF to read.
Co-Chair Olivia Chow reflects on The Blockchain Series (TBS) pilot at IMTC WORLD 2017 in Miami
A lot has changed since IMTC Director Hugo Cuevas-Mohr invited Roger Ver, the so-called Bitcoin Jesus, to the IMTC in Miami in 2012, just five years ago. He debated Arun Sharma professor at the University of Miami School of Business over the validity of Bitcoin. Participants recall that encounter with smiles on their faces remembering Roger Ver screaming to a screen showing live Bitcoin Trades while Dr. Sharma tried reasoning. An IMTC sponsor threatened to withdraw their support as a result for even discussing the cryptocurrency.
A lot has changed and The Blockchain Series (TBS) pilot was a testament of sorts. Read along.
QUÉ NOS DEJÓ EL 2017 y cómo vemos a la industria en el próximo año.
En un breve resumen escrito según mi perspectiva, voy a recorrer cuatro principales acontecimientos que vivimos en la Industria durante el 2017 y presentarles lo que podemos esperar para el 2018 con el fin de, en conjunto, mantener las empresas del sector vigentes y progresar pese a las dificultades de una industria en continua evolución. Estos temas son: 1) Transformación de la Industria 2) Regulación y más Regulación 3) Las Fintech y 4) Profesionalismo y Creatividad Empresarial, seguido de algunas conclusiones.
La experiencia nos da elementos de juicio y con gusto comparto por este medio mis apreciaciones.
On November 15th, the Financial Services Advisor, a Newsletter published by The Interamerican Dialogue, a Washington, DC think tank where well-known remittance expert Manuel Orozco is the Director of the Migration, Remittances and Development Program, has published a Q&A entitled What Is Driving Remittances to the Region? where Manuel and several colleagues – including myself, most obliged, gave their views to questions such as What are the most important factors driving remittances to the region? How likely is it that the United States will impose a new tax on remittances?
These are a summary of the answers published:
We thank our colleague Carlos Grossman, for the report out of Chile where the Antimonopoly Division of the National Economic Prosecutor Office (División Antimonopolios de la Fiscalía Nacional Económica – FNE) reports the investigation that took place after an August 2015 complaint by a Forex Firm denouncing seven banks of denying the opening of a bank account. The investigation and the conclusions are very important for the industry worldwide and Mr. Grossman has provided us with the report, so it can be read and used by any company in the industry that is been denied an account.
As you recall from the earlier blog, there are many reasons for MSBs to be cautiously optimistic: new banks are opening with a focus on various types of MSBs, regional and community-based financial institutions are gearing up to perform appropriate due diligence on potential clients, online firms who do not require branches for deposits are springing up rapidly and regulators are able to distinguish quality within the MSB industry vs. the historical “one size fits all” approach. The combination of these factors is opening doors for money transmitters, pre-paid providers, 3rd party processors and others in our much-maligned industry.
Let’s first remember. In April 15, 2017, Alibaba’s financial affiliate Ant Financial (Ant) agreed to purchase MoneyGram International, Inc. (MGI) for $18 per share. Ant, which is controlled by the famous Alibaba CEO Jack Ma, increased its price from $13.25 to $18 after RIA’s Euronet put in a bid for $15.20. In order for the deal to pass, the companies need approval from CFIUS.
What is CFIUS? The Committee on Foreign Investment in the United States. Is CFIUS under the watchful eyes of Mr. Trump? Are his America First policies at play here? Yes, definitively.
And we know in the industry, that US RIA’s Euronet is keeping a close eye on that decision. We all are. If the deal goes through every company in the industry will be more valuable… But let’s analyze the situation…
Key positive developments in banking for MSBs
It’s been a bleak period for money transmitters over the past several years. The specter of derisking —that business-killing policy of many banks in the US and globally—may be disappearing. At least in the US where other entities are stepping up. Our colleagues in other parts of the world are still seeing their local banks derisking yielding to the pressure of large global banks.
So, in preparing for the panel on “Derisking and MSB Friendly Banks” that I am coordinating with Hugo Cuevas-Mohr for IMTC WORLD 2017 I came up with 7 emerging factors that are giving hope to a strong, but beleaguered industry.
I am going to venture myself to write this article on Compliance, with the disclaimer that I am not a compliance professional and that the idea behind this is to get compliance colleagues to comment and compliance officers to pay attention.
Talking last week to a fintech company about their payment processing services in Mexico, i.e. bank deposits, one of their key selling points was that they do identity matching on every bank deposit that they process through Mexico’s SPEI System. They explained why, using a technology solution, this fintech was the only institution in Mexico that could positively match the name of the account holder with the bank account number or CLABE.
Knowing this fact, it raised in my head all types of questions.
On Friday, September 22nd, we closed our first Africa Conference. As I mentioned to all participants, the whole process of developing the conference was, from the start, an uphill race, surmounting obstacles and convincing sceptics. But just days before the event, the pieces of the puzzle came in together and a bright and inspiring panorama opened.
Our pre-conference field trip day planned by the IMTC’s team of Paulina & Claudia and Olivia and Rachel from Safaricom M-Pesa and it was executed to perfection. Our aim was to give industry professionals a hands-on experience on the M-PESA product. Many of us have for years spoken about M-PESA with no real personal experience on the merits and details of the service.
De-risking was an acute illness for the Caribbean financial sector in 2015 and 2016. In 2017, the height of the fever has broken, but the patient is still sick. Though correspondent banks in developed countries are no longer dropping services to Caribbean banks at a rapid pace, the region’s economies remain encumbered with a residue of increased costs, forgone opportunities, and reduced efficiency.
The problem developed early in this decade, as a reaction on the part of banks to the heightened scrutiny and increased capital and liquidity requirements they faced in the wake of the 2008 financial crisis. Facing an increase in costs – particularly on account of the increased due diligence required by enhanced anti-money-laundering/countering the financing of terrorism (AML/CFT) risk management procedures – major banks took a close look at the bottom line associated with servicing the customers Caribbean banks and their customers, and decided that the relatively small amount of business wasn’t worth the hassle.
Daniel Trías, consultant and specialist in foreign trade, banking, finance and family remittances, founder of DT Consulting and Member of the IMTC Advisory Board and who has accompanied the “Cono Sur” (southern cone) Associations in their meetings, their initiatives to find solutions to De-Risking, such as Creation of CIASEFIM, presents this Document entitled: “De-Risking: The Risk of No-Risk”. This Document (in spanish) not only illustrates the problem faced by financial services companies in the region but also sets out a road map and suggests solutions for regulators, banks, the financial services industry, Multilateral agencies and even politicians, to participate in a constructive dialogue on the subject. Failure to do so will continue to deepen the impact to financial inclusion and transparency undertakings, fostering informality and many unintended consequences, not yet imaginable at this moment.
Read the document online, download it as a PDF for print, Tablet or Kindle read.
How De-Risking is changing the face of Financial Services worldwide
In July 6th & 8th the Economist published two articles that, again, raised the de-risking threat discussion to new levels. The July 6th article was entitled “The great unbanking  – Swingeing fines have made banks too risk-averse – It is time to rethink anti-money-laundering rules” and the July 8th one: “Rolling up the welcome mat  – A crackdown on financial crime means global banks are derisking – Charities and poor migrants are among the hardest hit”. For us in the “low-income financial services provider’s sector”  the challenges, from regulatory pressures, rise in compliance costs and most of all, de-risking, are a survival issue.
This article is a broad view of de-risking, my opinions on some of the most recent developments that I have been reading, hearing and witnessing recently as we prepare for the “De-Risking Forum” on Nov 30 at IMTC WORLD 2017 in Miami. For detailed analysis on de-risking, its causes and the implications for FIs, you can find many great articles & documents online.
Mexican migrants in the USA are first class Mexicans. They are in general the risk-taker population, hardworking, with a different work ethic compared to the average American worker. They give a different value to their labor and the remuneration that they receive for that effort. Some are prosperous entrepreneurs too. Success stories abound throughout the US. They are far removed from the political campaigns in Mexico, in which they are included, to their regret, in the political speeches with highly demagogic and populist content. They are generally skeptical of the political agendas of migrant associations in the USA. For these reasons, among others, they are most likely to repudiate acts of corruption. They are also highly reasonable users (consumers) of the electronic remittances market.
Leon is a seasoned expert and business leader in the payments, remittances and money transfer industry. He has over 25 years hands-on experience and since 2007 has led DMA, Developing Markets Associates, a development consultancy based in the UK that provides a broad range of services that helps to mobilise funds into developing markets.
Leon is very active in Mobile Payments policy design and data collection, research into remittance market trends, pricing and new product development, consumer remittance price and quality comparison, financial literacy programmes to remittance receivers, diaspora outreach and diaspora investment analysis and programme design.
How the financial crisis, the evolution of Banking and Unbanking and the rise of technology in financial services are all connected
The financial crisis and the rise of technology in financial services, that has led to an increase in the importance of NBFIs (Non-Bank Financial Institutions) in the provision of financial services, has created a number of challenging situations that might seem unconnected but could be associated to the evolution of a new world financial order.
We will explore in this article two books, discuss small loans by NBFIs, mention the work of a California-based fintech and close with links to introduce our next blog, how the unbanking or derisking is also phase of the struggles we are facing as an industry and a major challenge for NBFIs all over the world.
The more I learn about money transfer comparison websites, the more I am fascinated by the results that they provide. And they are getting better and better, and they are each finding a way to present their information and develop their own character. Are they being used by end-users? Who, how? Are they been used by companies to see how the competition is pricing themselves compared to them? How consistent are the best priced companies?
All those questions are probably in your mind. I can’t answer all of them but by the end of your read you’ll probably have a better idea of this new side of this industry.
Last week, The Global Knowledge Partnership on Migration and Development (KNOMAD1) published its Migration and Remittances Brief #27 (April 2017) prepared by Dilip Ratha, Supriyo De, Sonia Plaza and the rest of the team2 of the Migration and Remittances Unit of the Global Indicators Group of the World Bank.
As I mention in the IMTC conferences, these great briefs are the basis for the information I use for my presentations and courses and by far the best information that is collected in the world on remittances.
This is Part 1 of a compendium/overview of what I find more important for the industry in this Brief; I hope it’s a helpful guide in case you have not seen it yet.
A new trend is ready to reinvigorate the remittance industry
The International Money Transfer & Payments industry has always relied on a large network of brick & mortar agents, both in the sending side of a corridor as well as in the receiving side. It is more true in the sending side, where mom & pop ethnic stores have dominated the landscape providing good and reliable services to migrants in many cities & towns in the world. Migrants trust them and even if they are losing ground to retail chains agent networks and other more corporate store chains, they still handle the large majority of orders sent in the US, Europe and the Gulf.
Western Union, MoneyGram, Ria Money Transfer have always published their agent number as a sign of the growth of their collection (on the sending side) & distribution network (on the paying side).
In the process of building the RemTECH Awards http://bit.ly/RemAwards1 and asking ourselves what innovation in the remittances industry meant, I searched the internet and talked to colleagues, both in the traditional financial services sector, bank and non-bank, as well as in fintech start-ups.
I began with fintech and what is truly interesting is that there is a broad understanding of what fintech is but almost everyone doesn’t see eye-to-eye in the details. With no boundaries of how much technology has to change a financial service or a product or how much disruptive the company – or the idea is, to be labeled a “fintech”, almost anyone could call themselves a fintech nowadays if it applies technology, in a large measure, to all its processes.
How is technology changing the remittance industry?
MoneyGram and Ant Financial Services Group announced on April 17 that the companies have entered into an Amended Merger Agreement under which MoneyGram will merge with Ant Financial. Ant increased the offer price from $13.25 per share to $18.00 per share in cash (The transaction is valued at approx. $1,204 million). The operation will be completed in the Fall of 2017. It has gained antitrust clearance from the US government and the filing of state licensing approvals has begun. MGI will operate as an independent subsidiary of Ant Financial and retain its brand, management team, IT infrastructure and headquarters in Dallas. (http://bit.ly/newMGI-Ant)
Never before in an IMTC Conference we have had so many representatives from such a large number of sectors of society: politicians, ex-politicians, researchers, academics, pollsters, migration specialists, opinion makers, journalists, social workers, representatives of NGOs, cooperatives, “Cajas” (community banks), workers’ banks, entrepreneurs, remittance companies directives and commercial bank executives.
I think that three factors contributed to this outcome. The first…
Stories from the startups on the front lines from Luis Buenaventura
Luis Buenaventura and his team at Bloom are passionate pioneers of the Bitcoin remittance industry as well as its most enthusiastic observers, and this book is their contribution back to this growing community.
Luis has spent the last few years focusing exclusively on cryptocurrency as a mechanism for cross-border money transfer, and he has managed to meet and learn from many of the other Bitcoin remittance players out there. Reinventing Remittances is a collection of conversations, essays, and real data from the field, and is illustrated with tons of graphics and photos.
The digital edition can be downloaded for free!
Update – February 16, 2018 ; New Bill in Oklahoma and Nebraska – Contributed by the MSBA
Georgia & Iowa move to leverage a tax on remittances – Financial Institutions are reacting
In a previous blog (in Spanish), posted in the midst of the many reporter calls, especially from Latinamerica (driven by the anxiety over the migration policies of the new US Trump administration), I mentioned the US legislators drive to tax remittances in the US. The State of Oklahoma is taxing remittances for some years now ($5 up to $500 and 1% after that). Several other States such as Georgia and Iowa are moving on this direction and the industry is watching. In the federal level there are also some initiatives being proposed. in an effort to fund the border wall.
Check the update from February 16, 2018 below.