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The global remittance market has been growing exponentially over the past few years and India is at the epicentre of this growth. Players in this business are looking to come out with a slew of new initiatives surrounding remittances. TimesofMoney, an India-based digital payment services company, is also at the forefront of this action and is planning to come out with a bouquet of services to help Indian migrants connect better with their families here. The president of TimesofMoney, Avijit Nanda, speaks with Moneylife's Sanket Dhanorkar in the first of a two-part series
Sanket Dhanorkar (ML): What is the current status of the remittance market globally as well as in India?
Avijit Nanda (AN): The remittance market globally is driven by migration. Migration is broadly segregated into two types - one is that of knowledge workers and the other is the unskilled labour force. The migration story is pretty strong and India is naturally a strong base for both these categories. We have technology workers or professionals who go abroad and work on client sites for product development, process development, etc. These people send money into India regularly. India is the largest recipient of remittances globally, witnessing inflows to the tune of $58 billion. The market has exhibited 20% compounded annual growth rate (CAGR) year-on-year. Globally, the market is about $240 billion-$250 billion. These two categories of immigrants come with their own banking habits. A large portion of the migrant population does not have access to banking infrastructure. These migrants choose other channels to do wire transfers.
However, knowledge workers look at convenience and transparency and approach their banks for transferring money. Traditionally, they were using bank cheques and bank wires, but with the emergence of service providers like ours, they chose to leverage on the technology benefits available in terms of transparency, efficiency of costs, pricing, convenience etc.
Since there are no intermediaries or channels either on the sell side or receipt side, the cost of providing such services is significantly lesser than what a traditional money transfer operator works on. Hence, we have the ability to provide better pricing. We have one of the lowest fees in the industry. We also understand that most of this remittance is towards family maintenance and living; so we also have a social obligation to remitters for them to be able to send money in an economical manner. The fact that I can manage this business on thin margins means that customers get the benefit at the end of the day. The efficiency of such a platform is there for customers to see.
ML: How do you ensure transparency and fairness in determining exchange rates?
AN: We tell the customer upfront what is the prevailing exchange rate on the day they book the transaction. This is the probable rate, which might get applied. However, the transaction takes about 2-3 days. So the money received ultimately is at the exchange rate which applies then. We tell them upfront that this is the indicative rate that might get applied. So, at least he gets a view of what the rate could be. He is only exposed to a marginal fluctuation in exchange rates of 2-3 days.
The moment you initiate an online transfer, the transaction lifecycle begins with us instructing the customer's bank through our bank partner to move money from his bank account. Our bank partner does the foreign exchange and ships the money out through the electronic payment system to the beneficiary's account. The customer is able to keep track of his transaction throughout all these stages. So at any point of time, the customer is in control of his transaction. Beyond that, he can get access to 24X7 voice and mail support, where there are human interventions available.
ML: What security mechanisms have been put in place?
AN: Ours is a fully compliant technology enabled platform with standard security measures. The website has 128-bit encryption. We have intrusion detection at a gateway level. There are built-in capabilities to deal with any kind of exposure to the external environment. We have a robust risk-mitigation programme in place. It ensures that we constantly upgrade our risk-management practices. We also have the highest level of security certification. We are PCIDSS compliant, which means our transaction-processing capabilities are as per norms laid down by any security standards. There is a rigorous testing process that is externally certified and tests our infrastructure, people, database, encryption quality, etc. Our entire infrastructure is in a militarised zone. For instance, our database administrator does not have access to customer data, which is stored in an encrypted form. Our entire back-end is hosted in a secure environment. We also keep upgrading our technology capabilities constantly. After all, customers put their faith and belief in us and hence, it is very critical for us that we manage that effectively.
ML: What is the business model working behind this service?
AN: Ours is an interesting business model. We always have a bank working at the back-end. These transactions are banked transactions and ride on banking licenses. So we get our regulatory interfaces managed through the bank partner. The bank works as the global clearing and settlement partner and hence, we are that much more secure in terms of getting customers onboard and having know-your-customer (KYC) compliance.
ML: Money transfer companies face direct competition from informal transfer systems like hawala networks...
AN: Yes, hawala as a channel has been in place for ages now. The choice of the channel is pretty much dependent on the nature of the immigrant. So earlier, money transfer companies were fewer in number. Banks were offering wire transfer services. But if you were not a banked customer, you had a limited choice of being able to send money through an official channel. Many of these migrants are illegal and hence cannot approach banks, who ask them for their immigration status. For them, the hawala channel is the only alternative. Banks and money transfer companies like ours have realised that there is huge potential of making services available to more and more people by improving the distribution reach, network and accessibility. Usage will come from these efforts. Gradually, people are adopting official channels that are more accessible. Hawala also comes at a significant cost. We have seen the dependence on hawala channels diminishing as we move ahead. That will never go away completely. But I do feel that the throughputs to that channel are coming down.