Remittances 2.0

Andrey Aydov and Iain Blackwood, QSystems

June 14, 2021 | QSystems ICS

The demand for change in cross-border payments has been on the agenda for a long time with many quick wins successfully achieved. Today, it’s acknowledged that further progress requires strong international collaboration and commitment.

The G20 and United Nations, amongst others, recognise the value of remittance flows in helping to drive robust, sustainable, and balanced growth. Despite this recognition, and many tech-enabled initiatives, progress remains steady at best. The purpose of this article is to outline immediately available solutions that will accelerate progress.

The ever-increasing rise in cross-border payments is inspiring the development of new solutions and greater investment to support the G20’s ambitions for “faster, cheaper, more transparent” remittances.

In our 20-year history of developing and taking solutions to market, QSystems have acquired industry insights from partnering with large financial institutions, retail banks, post offices, mobile operators, Money Transfer Operators (MTO’s) and the central banks of the CIS region. Daily we observe the obstacles faced by our clients. Furthermore, these frictions which drive the cost base are noted by the G20, such as fragmented data standards and a lack of interoperability, as well as complexities in meeting compliance requirements, including anti-money laundering and countering the financing of terrorism (AML/CFT). There are also data protection issues that arise from different operating hours across multiple time zones, along with outdated legacy technology platforms to contend with.

In this context, we have developed the “Remittance Platform” – a unified gateway of money transfer processing for any participant involved in the remittance ecosystem, which unifies, standardises, and optimises this infrastructure nationally. All stakeholders benefit from world-class interconnectivity, functionality, and efficiency, driving improved service levels and significantly reduced costs.

But many of the technical innovations that have been deployed successfully are mainly used to achieve incremental improvements with existing players and facilitate new entrants. We would argue that a more profound restructuring is possible and maybe essential. In the context of cross-border payments, the opportunities to disrupt the status quo are real. In today’s remittance business model, there are at least four, if not more, parties involved in each transaction. Each profit-making participant performs activities that take time, involve data manipulation, duplicate AML checks, and require settlement of funds – all of which add time, cost and risk to the process.

Remittances generate fee and FX income paid by the consumer, with these fees applying a charge of around seven percent on average to individuals sending money home to support their families. In a typical year these extract $35.5bn – more than the global annual aid budgets – from the remittance ecosystem.

Would the economics change if the business model changed from multilateral to bilateral or unilateral? Why does a post office in Spain depend upon a technical and settlement relationship with Western Union to send remittances to the post office in Romania?  The answer is largely due to historical factors, with Western Union offering a global network. However, there is room for more blended solutions, more corridor specialists and more bilateral relationships. Technology platforms exist now that enable those with strong trusted brands and consumer franchises to offer unilateral and bilateral corridors opening the door to post offices, retail banks, mobile operator’s and social media platforms to enter the space, reduce costs and transaction fees, while also improving competition and offering more choice to consumers.

Today, available platforms improve real-time compliance with international standards set by the World Bank and the Bank for International Settlements, such as:

  1. Transparency and consumer protection;
  2. Payment and settlement system infrastructure;
  3. Legal and regulatory environment;
  4. Market structure and competition;
  5. Governance and risk management.

Architecturally, modern money transfer solutions have variable cost components installed in the cloud infrastructure that use both artificial intelligence and blockchain to standardise and secure data and transactions. But with these digital technologies and common standards, any participant or entrant to the money transfer process can perform any role, enabling new slimmer and less expensive business models that truly benefit consumers and stakeholders, laying the foundations for financial literacy and inclusion. The future is here!



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