From Traveller´s Cheques to Cashless: Leon Isaacs Explains his Experience with Remittance Innovation

Leon Isaacs once joked that he’d throw me over a boat when I met him in New York at the first RemTECH Awards back in 2016. The comment from the CEO and co-founder of Developing Markets Association (DMA) was in response to the research I had published on the US remittance market. DMA is a remittance consulting firm most famous for performing the often-quoted remittance statistics of the World Bank. Although he never actually sent me into the East River, I was a newcomer to the industry, and Leon had a different opinion than mine.

No less, Leon and I appreciate each other’s perspectives. Leon’s discerning eye and experience lend himself to be a bit more conservative, while, at the same time, he keeps an open mind asking my opinion, particularly on the ones relating to my blockchain specialty. As a result, we’ve now worked on a handful of industry events together, including the RemTECH Awards whose award ceremony will be held at IMTC EMEA 2019 on July 3rd in London (where DMA is headquartered) this year.

With the same tongue in cheek English humor, please enjoy the first interview in a series of RemTECH Chats. We cover Leon’s experience with innovation in the industry: since the 1990s to the solutions he thinks can have an impact today.

Olivia Chow: How did you get involved in the money transfer industry?

Leon Isaacs: “Wrong place, wrong time”!! It was back in the early 1990s and the company I was with were looking for a replacement product for the old paper-based travellers’ cheques (some readers will be too young to know what these are).  I was asked to go to the Philippines to look at a remittance service and I never managed to get out of the industry!!  Seriously, I thought it was the luckiest business event for me, and from that moment I have never looked back.

OC: Did you find a solution to replace traveller’s cheques on that trip? If yes, what was it?

LI: Travellers cheques were a paper based product that enabled a traveller to physically present
one at any bank that accepted it in the country that they were visiting and receive local
currency in exchange. This was before credit and debit cards were widely used and it was
developed by Thomas Cook in around 1872. The solution that was developed was the
international pre-paid card, which is still being used today.

OC: You’ve seen a lot of innovations in remittance history, then, Leon. Why did you start DMA?

LI: I had worked for money transfer companies for 13 years and they kept getting taken over.  Each time new management came in and wanted greater returns but with less input.  The emphasis was all on making money and not on how to make the consumer’s life better.  At around this time, governments were getting interested in remittances but their understanding of how remittance companies operated was limited.  There was a gap that I thought I could bridge at DMA (which is now called DMA Global).  Basically, I could use my practical knowledge of remittances to help inform governments and the international donor  communities about the needs and challenges of the private sector whilst at the same time helping explain the perspective of the development agencies to the private sector.

OC: What are the projects you are most excited about working on as of late?

LI: Mainly it is developing roadmaps and solutions for how we are going to reach the [United Nation’s] Sustainable Development Goals and Global Compact for Migration. In addition, studies that show the role of digital and what needs to change for it to be effective. There is a lot going on right now and we need to harness the renewed enthusiasm to change the current business model.

OC: Speaking of the UN, the first RemTECH Awards was held at their headquarters in New York. I heard, there, you thought the idea of a RemTECH Awards was “insane” the first year in 2017, but you have since participated as a judge each year. What has you committed?

LI: You are right, I did as I thought that there was a lot of ‘smoke and mirrors’ or ‘snake oil salesman’ out there.  However, I find it fascinating the different mindsets of innovators and it is a great way to see what is being developed and trying to understand whether it will make a big difference.  It really helps to understand the new trends and, you never know, we might just find the ‘silver bullet’ that will solve all of our challenges!

OC: For you, what are the most important things to look for in an entry? What makes one stand out to you?

LI: It has to be solving a real problem and not a ‘solution looking for a problem’.  It must be customer focused, scalable and show a real understanding of a particular challenge or a need.  I am not really interested in the specific technology but what is it trying to do and whether the developers understand the user and adapt to them rather than trying to get the user to adapt to the developer.

OC: So it could include blockchain or not is what you’re saying. And you’d have an idea about “real problems” as DMA conducts some of the most authoritative research in the industry. From your studies and experience, what are the biggest industry issues you hope innovation can address?

LI: There are a few but the main ones are: a) change the value chain and eliminate agents, b) get cash out of the system, c) link remittance payments to accounts (wallets, bank accounts or something else), d) customer identification, e) compliance/KYC, etc in order to build trust and address de-risking

OC: Which ones are most ripe for innovation?

LI: All of them!

OC: Why do you think we need to eliminate the agent? They play a key role in customer
relationships at the moment. How do you think that can be done?

LI: At the moment the remittance value chain is too long, it sometimes looks like this: Customer, agent, master-agent, money transfer company – all on the send side. And then, master-agent, agent, customer – all on the receive side.

Putting this together you get: Agent, masteragent, MTO, master-agent, agent – that is potentially 5 different entities in one transaction. If each of them earns 1.5% then the total cost is 7.5%. If we are to get to the goal of 3 percent we can only have a maximum of 3 people in the chain. Agents do provide a key role in the value chain and people trust them but the use of both cash and agents is one of the major challenges that is preventing derisking from improving.
As we bring in more automation and people don’t need cash then their usefulness will wane.
We have to encourage more use of digital and get cash out of the system

Thank you for enjoying our first interview in our RemTECH Chats where we learn about the remittance industry’s makers and shakers. For those remittance innovators entering into RemTECH, I hope you have a better idea on what this judge is looking for and that you submit your entry.