Battle to reduce frictions ensues as Pakistan in focus

KARACHI: As Pakistan is becoming an attraction for global remittance businesses because of its growing size, instant fund transfer in addition to price benefit are two unique selling propositions in focus for them to grab and increase market share.

If one can guarantee that those funds get into the hands of recipients easily, it also has a visible effect on the real economy, according to Richard Ambrose, chief executive officer of a European digital money transfer service Azimo.

“For Pakistan, it’s an economically rationale to encourage remittances because most years the remittance volume is in the range of $20 to 25 billion in Pakistan so it’s equivalent to eight to 10 percent of GDP,” Ambrose said in a telephone interview.

Pakistan stands out in 2020 as a market where the volume transactions have gone significantly against the average. The country has a clearance system for instant transfer that only 30 or 40 countries have around the world.

“If you run a remittance business, Pakistan is going to be in the list of top 6 or seven countries in your portfolio because of the size and diaspora and how actively they send money home,” said the alumnus of PayPal. “

Pakistan stands out for us for couple of ways. Most of senders are in the UK. They send quite a lot sum. An average they are sending 400 pounds ($550) each time, which is quite high relative to our portfolio remittance market around the world.”

Digital money transfer operators Xoom and Transfer Wise have been operating in Pakistan for quite sometimes due to growth in remittances. Azimo announced its launch in collaboration with HBL on Monday after spending a few years in Pakistan facilitating remittance transfer through remittance specialists. The digital-only operator provides services in more than 200 countries and territories.

“It became apparent that we were missing an opportunity to get much bigger share of the market in a critical remittance company because particularly the service was not quick enough that takes two days for delivery,” he said. “We had a basic solid service in Pakistan for the last few years. But, the service of HBL is significantly quicker and a quite a bit cheaper. We would expect overtime to add additional banking partners.”

Ambrose said Pakistan is not the highest risk market for the money transfer operator, but it is “in top quartile because of the global concerns over terror financing”. And, that would mean more customer checks.

“We do lot of checks at the point of sending to make sure that the sender is a legitimate individual. The funds are coming from legitimate sources, the recipient is a legitimate individual and there is no fraud going on,” he said.

Ambrose agreed to the World Bank’s reason why remittance inflows into Pakistan and Bangladesh remained relatively unaffected during the last year. “The pressures of lockdown and reduction of travel mean that informal market has shrunk for sure. There has been acceleration in people trying digital for the first time,” he said. “Remittance is resilient and robust and countercyclical in many cases. We hear from customers very often they would rather go without things themselves than reduce the amount of the money they send home.”

Price, speed and convenience push people to jump from sending money offline to using app, said Ambros. Globally, 30 percent of money transfer of $600 to 700 billion is initiated from smartphone or computer.

For markets like Pakistan in fact, Azimo’s margin is less than one and a half percent, compared to up to six percent charged by other services. “Speed is also normally a big factor. In lot of countries, it is not unusual for a remittance payment to take a day or two day and three days in some cases to arrive and be recognised by the bank or the office that’s receiving it,” said Ambrose. “There are quite a few services in Pakistan that would take one or two days. There are relatively small numbers of operators that do instant transfer, for instance within five minutes of pressing the button.”