‘Digital remittances can change the game for financial inclusion’

KARACHI: Promoting the usage of mobile money to receive remittances digitally from across the world is the best option to bridge the gap between formal and informal channels of international funds transfer as well as enhancing financial inclusion.

It was stated by Hamza Islam, the country director for Pakistan at WorldRemit, the world’s leading online money transfer firm that provides international remittance services to migrant communities around the globe.

Following is the quintessence of an exclusive email interview with Islam.

Q: Can the gap between formal and informal sources of remittances be narrowed using digital remittances?

A: Experts estimate that a high volume of remittances to Pakistan currently go through informal channels including friends, relatives or other non-recorded sources such as hawala. Many people still use these unregistered money transfer methods as they believe they are more convenient. However, by switching to digital money transfer methods, the diaspora could save themselves time and money. Digital remittances cut costs as the diaspora do not have to pay high fees to third parties to send money on their behalf, or travel to a money transfer agent.

Eliminating cash on the sending side also makes digital remittances a lot safer as there is a digital footprint to deal with global compliance requirements and act as a strong deterrent to criminal groups.

Q: What is your overview of Pakistan's digital remittance market?

A: The World Bank estimates that remittances to Pakistan hit an all-time high of over $20 billion in 2018, representing 7 percent of the country’s GDP. Although the remittance market remains predominantly offline and digital remittances are still in their infancy, multiple online players are now establishing their presence.

The growth trajectory of Pakistan’s digital economy and the increase in mobile penetration makes the remittance market ripe for digital disruption. According to the World Bank, just over one-fifth of the population had access to a transaction account in 2017. However, there are 153 million cellular subscribers (nearly 75 percent of the population), making mobile money an attractive solution for enhancing financial inclusion by allowing the unbanked population to receive remittances directly to their phones.

Q: Do remittances stand to benefit from fintech advancement in Pakistan?

A: Absolutely driven by technological advancement, the M-wallet sector has shown significant growth over the last few years and the number of players has increased, which is of benefit to the remittance market as well as for customers. According to the State Bank of Pakistan, M-wallet transactions accounted for over 70 percent of the branchless banking market share, offering customers a convenient and fast way to send, store, and pay money directly from their phones.

The State Bank of Pakistan’s policies that are aimed at promoting home remittances into M-wallets have also played an important role in raising awareness of the benefits of mobile money. We expect for this to in turn lead to an increased adoption of mobile money to receive remittances from across the world, conveniently and quickly. With our partner JazzCash, we offer international transfers to mobile accounts in Pakistan, enabling the diaspora to send money home directly from their phones to arrive within two hours.

Furthermore, WorldRemit supports financial inclusion by offering a variety of methods to receive money regardless of whether the recipient has access to a bank account. As well as bank transfers, we offer three other convenient ways to receive money which do not require the recipient to hold a bank account- mobile money, airtime top-up, and cash pickup.

Q: How do you see the performance of State Bank of Pakistan-backed ‘Promotion of Home Remittances through M-wallet Accounts' scheme?

A: The ‘Promotion of Home Remittances through M-wallet Accounts' scheme is an excellent and timely initiative that will encourage people to receive money in their mobile accounts. You can see every mobile money operator promoting these incentives which is a great sign because this will inform the masses who receive money on a regular basis about the benefits of mobile money.

Q: What are your company's future plans for Pakistan?

A: We launched in Pakistan in 2012. Our transaction volume is growing at over 90 percent year-on-year, and we and are proud to partner with a number of leading financial institutions in Pakistan including JazzCash, the country’s largest mobile money provider.

Pakistan is a priority market for WorldRemit and we are focused on increasing our partner network to connect millions more Pakistanis living in urban and rural areas to our fast, secure and low-cost digital money transfer service.

We are executing marketing campaigns in Pakistan and its top sender markets to promote our service and the positive impact of digital remittances on the country’s growth.