The Asia-Pacific (APAC) region is seeing significant growth in remittances. However, due in part to the current challenges associated with moving money between currencies, this high growth in remittances is juxtaposed against the high average cost of sending money.
In order to effectively tap the dynamic regional market that drives a volume of nearly 2 billion remittance transactions per year, it’s important to have global reach with locally relevant service offerings.
Businesses looking to offer remittance services must meet recipients where they are—whether it’s money paid out to a mobile account or paid out to cash on a remote island. Though senders ultimately decide the remittance provider, the choice is highly influenced by what their receiver demands.
While rapid speed, high reliability and low cost are required to remain competitive, it’s locally relevant coverage and payout options that differentiate service providers. In the second part of our remittance series, we’ll explore what it takes to grow and win in APAC countries—specifically The Philippines, Thailand and Australia.
Current Remittance Solutions in APAC
In The Philippines, cash dominates. Even though the country recently launched a low-value, instant payment system that permits users to make digital payments to bank accounts, adoption remains stubbornly low and cash remains as the most critical payout option for remittances. Thus, service providers need to be plugged into the predominant outlets for cash payouts, notably including Cebuana Lhuillier and Palawan.
Similarly, cash transactions still represent a staggering 90% of Thailand’s domestic payments value. In contrast to The Philippines, though, the low-value, instant payment rail in Thailand has seen much higher penetration. PromptPay, launched in 2017, reached an average of 4.5 million transactions per day in under two years and attracted an impressive 49 million registered users. As a result, the volume of digital payments increased by 83% from 2016 to 2018.
It’s important to factor the enormous impact of PromptPay in Thailand to be successful. Whereas in The Philippines you can get far with broad cash coverage—in Thailand, PromptPay is needed as table-stakes. Offering cash and other wallets in addition to PromptPay can help gain a competitive edge.
Conversely, the Australian remittance market is quite different from the Thai and Filipino remittance markets. In particular, Australia is primarily a sending market for remittances and the demographics of Australian receivers tend to differ from receivers in emerging APAC countries as they often have high financial inclusion, earn higher incomes and work as business professionals or students.
A whopping 99% of the Australian population is banked. So, the best approach in Australia is to focus on bank account access through partners or via the New Payments Platform (NPP). It’s important to note that NPP doesn’t offer 100% payment coverage yet, as banks continue to expand NPP’s integration and utilization capabilities. Since Australia is a mature payments market, instant and transparent payouts with 24/7/365 availability and upfront visibility of fees can provide a best-in-class payment experience.
These Solutions Are Not Scalable Globally
The challenge with all of the solutions outlined above is that they’re difficult to scale worldwide. For example, it’s challenging to develop the most competitive payment capabilities in each of these disparate markets, without exhausting working capital and human resources to get there.
As such, many organizations resort to partnerships to tap these lucrative markets. However, establishing banking or correspondent partnerships can take considerable time and energy, and ultimately may not ensure an optimal experience for customers. Furthermore, to maintain a partnership network, numerous bespoke APIs need to be built and managed in addition to pre-funded accounts in destination currencies, all of which lead to high remittance fees.
Financial institutions need an easy, transparent and more efficient way of completing cross-border transactions.
There’s A Better Way: On-Demand Liquidity
Until now, remittance providers needed to work within traditional, complex payment rails. Today, blockchain and digital asset technologies are changing the status quo. Banks and payment providers are leveraging RippleNet’s On-Demand Liquidity (ODL) as an alternative to traditional pre-funding. ODL uses the digital asset XRP as a real-time liquidity bridge between the sending and receiving currencies.
In the span of seconds, customers who use ODL are able to free up capital, guaranteeing the most competitive FX rates to their customers and processing global payments at unprecedented speeds.
Taken together, the benefits of speed and cost enable those leveraging ODL to compete more effectively and provide their customers with an easier and more reliable way of sending money home. If you’re interested in learning how RippleNet’s ODL can help better serve your customers, contact us.
Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.