Beyond tech: How user behaviour impacts money transfer innovations in Southeast Asia

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Migrant workers will probably be the biggest beneficiaries of fintech-driven innovations in financial transactions in Southeast Asia

We live in an increasingly globalised world, with over 250 million people living outside their country of birth. Many are sending money back to their families; the World Bank estimates that global remittances hit US$581.6 billion in 2015.

Asia is expected to receive a majority of remittances, with South Asia, East Asia and Pacific region projected to receive US$264.8 billion in 2017. Three Southeast Asian countries — the Philippines, Vietnam, and Indonesia — are among the top 10 recipients in 2015, and remittance inflows are an important part of these nations’ economies, constituting 10.3 per cent of the Philippines’ GDP in 2015, 6.8 per cent in Vietnam, and 1.1 per cent in Indonesia.

As with many other sectors, the remittance industry is being disrupted by changing consumer behaviour and technological innovations. Nobody could foresee how apps and technology would affect public transportation and vacation rentals five years ago. Now everybody knows how Uber and AirBnB changed everything with a community-based model powered by apps and the internet. Within Southeast Asia, regional services such as Grab, Go-Jek and Didi have revolutionised transport, while e-commerce sites like Taobao and Lazada have changed the face of retail.

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There is a similar shift in remittances.

A huge opportunity

The pace of change is rapid, fuelled by the huge market opportunity of a service with large volumes and frequency. Disruptors are offering cheaper, quicker, and simpler alternatives to traditional solutions, with mobile money as one example.

Consumers are able to send money across borders almost instantly using their mobile phone. The GSM Association’s (GSMA) October 2016 report showed that mobile money transfers cost less than 50 per cent compared to global money transfer operators (MTOs). This attractive growth opportunity saw investors around the world taking note, with millions of dollars in funding going to money transfer startups such as London-based WorldRemit.

In Southeast Asia, with its massive remittance flows, innovative startups are targeting specific niches and migrant groups (Ayannah and Toast for Filipinos, for example).

Behaviour, not just tech

Of course, new tech is not the only factor when it comes to consumer preferences. Understanding consumer behaviour and addressing consumer pain points are critical. Understanding why and how people use your services is very important, and remittance is no different.

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TransferTo has conducted research into remittance behaviours across migrant workers in Singapore. The survey found that workers from these countries sent an average of 30 to 50 per cent of their income home each month, with a majority using traditional money transfer operators and fees as high as S$15 (US$10) per transaction. On top of that is the need to queue and the hassle of handling physical cash. The survey respondents identified convenience, trustworthiness and speed as the most important factors in their remittance journey.

These workers typically earn less than S$1,000 (US$700) a month, and so fees take up a sizeable chunk of the money they send home. The money is important; beneficiaries of remittances, usually their family members, use the money for food and education, and sometimes for emergencies.

Transparency and trust need to be built into the money transfer process. In traditional money transfer, there are many variables that affect fees: what is the amount, where are you sending the money to, how do you want the recipient to receive the money – cash or bank account – how are you paying for this transfer, in addition to currency exchange rates.

Drawing parallels to taking a taxi, Grab and Uber’s fare estimates ahead of taking a ride is a boon for the consumer, who knows how much they must pay for their ride, rather than the traditional taxi fare system, wherein you find out the fare and surcharges at the end of the trip.

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Another aspect of consumer behaviour is the increasing adoption and use of smartphones. With smartphones becoming cheaper, and 2G networks starting to be shut down in many countries, smartphone adoption is expected to increase significantly in the next few years. Our own survey showed a more than 90 per cent adoption rate for smartphones among migrant workers in Singapore. These trends mean that mobile money — and to some extent airtime top-ups — are becoming a very viable form of remittance.

The market opportunity for mobile money and remittances is huge. There is tremendous untapped potential, especially as we look at customer pain points and the need for a more relevant service for migrant workers.

If the players in the new remittance ecosystem — banks, money transfer operators, and the new players from fintech, telcos and mobile money operators — can find a way to provide migrant workers with a solution that is cheaper, better and faster, there can be a seismic shift in the way remittances happen.


The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, submit your post here.

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