Making Way for Digital Agents

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 UnionThe Western Union Company is a US financial services company with headquarters in Englewood, Colorado with offices and agents all over the world offering services such as money transfers (P2P, P2B and B2B, money orders, and other business & commercial services. With close to 12,000 employees, more than 500,000 agent locations in over 200 countries and territories, Western Union is... want more?, 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).

The very large distribution networks

Western UnionThe Western Union Company is a US financial services company with headquarters in Englewood, Colorado with offices and agents all over the world offering services such as money transfers (P2P, P2B and B2B, money orders, and other business & commercial services. With close to 12,000 employees, more than 500,000 agent locations in over 200 countries and territories, Western Union is... want more? boasts 500,000+ Agent locations (and 100,000 ATMs and kiosks), MoneyGram 350,000 agent locations and Ria Money Transfer 317,000 locations. True, these numbers account for all the retail chain stores, bank branches, cash-in/cash-out locations (including ATMs) of these company’s correspondents in dozens of countries, which are not precisely their direct agents. But that’s beside the point. These brick & mortar locations are seen by some digital visionaries as facing extinction. They fail to understand why customers are still using agents to send or collect from them, remittances. But even if that extinction will not happen as soon as some visionaries have predicted, parallel to these agent networks – and also from them, a new breed, or species, is evolving: the digital agents.

Chart published on Saveonsend Blog: TransferWise: Rebel, What is Your Cause?

Croos Border and the Digital Channels

Let’s look at the sending side in countries like the US and Europe where brick & mortar agents dominate the landscape and generate probably 90-95% of the volume sent, even with the continuous growth of direct-to-customer offerings by WU.com, Xoom, MoneyGram, TransferWise, WorldRemit and others like Remitly, Azimo, etc.

In a very detailed article about TransferWise (that you must read if you have not yet) Yakov Kofner from SaveonSend published this chart which illustrates the quarterly volume (2014-2016) of the larger international money transfer companies

Chart published on Saveonsend Blog: TransferWise: Rebel, What is Your Cause?

It must be said that other traditional agent-based MTOs besides RIA Money Transfer who is shown in the chart, Xpress Money/UAE Exchange, Transfast, Uniteller, Pronto Money Transfer, are also rapidly developing their digital offerings. Smaller Digital-First companies, mostly in the mobile space are also coming along, going directly to consumer.

All Digital-First Companies have spent and are spending scientifically large amounts of money acquiring new customers through online and social media marketing campaigns. Xoom reports $35-$45 dollars per customer acquired but not all stay on and become regular clients and Xoom has found out there’s plenty of churn in the customer base .

Let’s look at Walmart as a Digital Agent

In the US, Walmart is the number one brick & mortar agent for MGI and in 2014, 22% of MGI’s fee revenue came from Walmart. That was before Walmart signed a deal with RIA Money Transfer in Q2 2014 for its domestic money transfers (Walmart-to-Walmart P2P service). At the end of 2016 MGI & Walmart announced their new product, a type of money-transfer-as-a-service (MTaaS) with their new online money transfer platform https://walmart.moneygram.com/.

Also, the Walmart App has a Money Transfer feature to Skip the Line to send money transfers; check it out here on your right. I think this feature should give executives in the industry some good ideas to think.

In the UK, Walmart’s wholly owned ASDA supermarket chain, the country’s third largest supermarket chain, has just launched Asda Money Transfer Powered by Ria, available to customers in the United Kingdom. As an agent of Ria Money Transfer, ASDA will also become a brick & mortar agent rolling out the service in selected Asda stores nationwide starting in June 2017.

More partnerships to be developed soon

If the increasing presence at our IMTC Conferences of executives from agent-network chains is an indication of things to come, I expect more of these partnerships to be developed in the next few months. Especially for companies that are already brick & mortar agents with a strong client base, they need to start planning what to do to work on their digital future and decide who to partner with. Partnering implies not only the technology behind but most importantly the customer service part. New clients do need following up but when they get themselves set-up, transactions can become repetitive and easier to manage. But there are always situations that need management like acts of nature, suspension of services, forex trading situations due to extreme exchange fluctuations, etc.

Niche ethnic agents might be able to develop a sizable digital clientele if they are involved in a community that trusts them. Some of these agents provide a number of services to their communities, such as packaging, post office boxes (virtual or physical), translations, notary services, nostalgic products, airtime, etc.), some of them performed over the phone or even trough ecommerce sites.

Brick & Mortar Agents are loosing their Bank Accounts

Becoming a Digital Agent can also be a solution for some agents that are having their bank accounts closed with the extreme derisking practices of banks in the US and Europe and restrictions to direct customer cash deposits into agent’s accounts.

Let me take a moment to give you a true story. An agent in Florida who has been in the same south west Miami location for over 20 years, saw most of its niche clientele move to other areas of the city due to hurricane-related incidents. Clients would call him to keep on sending money through its store but driving to its location was not an option for them any longer. He then developed a system where known clients will deposit into the agency’s bank account, send a picture of the deposit slip with the remittance instructions, he would then confirm the deposit with his bank online, process the remittance, scan the receipt and send it online to the client. After a year, the bank called him up and gave him 30 days to close the account. Even though his system was safe & compliant as determined by a compliance consultant who tried to reason with the bank, the bank wouldn’t accept explanations and the agent lost the bank account he has held for 15 years or more.

Maybe a digital agent solution can be an option in this case. Some agents are using prepaid card products or mobile wallet to serve these types of clients that are not walk-in clients any longer.

It is not as easy as it seems

But developing a digital agent network for US or European based companies is not easy at all. There are bank issues, order and payment processing issues to resolve, compliance responsibilities, branding, pricing, but most of all technological issues. Mobile Wallets who have been trying to develop digital agency relationships with licensed money transmitters have found that most proprietary software systems used by MTOs, in the US at least, are still far away from providing reliable and efficient APIs. Money Transfer Software providers have told me that their systems do offer the capabilities to develop digital agents and that is indeed one of the questions most asked by their new clients looking to upgrade their older systems.

I must add that Digital-First Companies are also working in referral and affiliate marketing campaigns which are a way for companies & individuals to drive traffic to these companies and make a commission. I am not exactly aware of what type of legal arrangement TransferWise has with Facebook for their via Facebook Messenger Money Transfer Service . Could traditional money transfer companies offer these kinds of commissions to their brick & mortar agents that drive clients to their online sites and do “agent deals” that might be attractive?

If you are aware of digital agents in the industry coming online/mobile please let us know (or if your company offers these capabilities) as we receive questions constantly and could send interested parties in your direction. Contact us.

In a next blog we will tackle digital agents in the paying side of a corridor where mobile wallets, banking agents and other solutions are coming into play, including cross-border money transfer schemes in Africa where money is sent from one wallet to the other in real time.