The Future of Remittances

future remittance azimo

As the world economies grow ever more connected and travel more accessible, remittances become an ever-more vital piece of the FinTech puzzle. Here PaymentEye’s Lucinda Beeman asks Michael Kent, founder and CEO of Azimo, what’s next for this vibrant market.

In your view, how healthy is the remittance market in Europe and worldwide?

It’s certainly healthy for the incumbent money transfer players, but for customers it’s not.  Remittance prices in Europe are some of the highest in the developed world, with fees reaching as high as 10% per transaction. No one, especially hard-working migrants, should have to pay that. It’s something we’re trying to fix.

What are some of the major trends driving development of the space, now and going forward?

We live in a world of hyperconnectivity, where the ways we live, work and interact with each other, especially remotely and across borders, have fundamentally changed thanks to digital, mobile and social technology. By 2020 there will be 6bn smartphone users worldwide – close to the number of people on the planet. That’s nearly everyone online, all the time. Social media is also a key driver of change. Over 2bn people are active on social media networks and, for migrants in particular, it’s become a vital way of staying connected to family and friends abroad.  These changes are resulting in a huge shift in the way that people interact with their money: lending, borrowing, sharing, donating, paying and getting paid.

While digital payments and transfers are rapidly overtaking cash it won’t render it obsolete as some predict. Cash will remain an important payout method, especially in developing nations. We will see mobile wallets gain more market share. By 2016, Juniper research predicts that mobile wallets will reach 200m – more than 100% growth from the end of 2014.

This article first appeared in our Payments Revolution magazine

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According to the World Bank, remittance growth is set to slow in 2015. Has this been borne out, as far as you can tell, and what impact will the slowdown have on FinTech companies operating in the space?

We’ve not seen it – Azimo continues to grow very fast. It’s hard to generalise, but having been in the industry for a while now, what tends to happen is that people send the same number of transactions but a bit less each time. That reflects the reality that for many people is essential spend: money that gets allocated before anything else for the sender. The slowdown also tends to make customers even more focused on value than usual, which has helped the adoption rates of the digital only players, who tend to be around 80% to 90% cheaper than the incumbents. Broadly speaking, it’ll have limited impact on the FinTech industry.

Europe

Has the anti-immigration rhetoric sweeping across Europe and turmoil within the EU impacted the remittance market? How do you see these trends playing out in the future?

Not yet, to my knowledge, but it does worry me as it is likely to have long term negative consequences on how many people want to emigrate to Europe with their skills and expertise. It’s a shame, really — we should be welcoming migrants with open arms, not turning them away at the door. Their contribution is what makes a country thrive.

What are some of the barriers to adoption you’ve seen for potential customers, particularly those who still use your more expensive competitors to send money? How can the industry help them overcome these obstacles?

There are two key barriers. First is awareness; most people don’t know that you can send money abroad online, quickly and at a fraction of the cost. The second is trust in a new service. This is a challenge for any new business, but especially a financial one — handling people’s money is an emotional business. We work hard to overcome these with friendly and responsive customer support, driving down the cost of every transaction and encouraging our customers to share with friends and family. Word of mouth is one our greatest drivers of new customers.

What’s next for the remittance market and for Azimo more specifically?

Remittances have been at the fringe of the financial services industry for such a long time, and it’s finally having its moment in the sun. Over the next five to 10 years we’ll see greater visibility of remittances impact on the global economy. Mobile wallets will become ubiquitous, with nearly 2bn more people having smartphone-centric mobile wallets in Africa and Asia, a major step forward for financial inclusion.

Given the rise in social media adoption, we’ll see FinTech players integrate more with messaging and chat features such as FB messenger, WhatsApp, Viber, WeChat, Google Hangouts and the like. Whether those services are native or offered using third parties, it’ll bring our finances closer to the digital apps we use every day. For Azimo, we’ll be looking to expand to new markets, such as Asia, and build even tighter social media integration.

This article first appeared in our Payments Revolution magazine

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