�One network� model to transform remittance market

In Bangladesh remittances represent a critical source of finance for millions of beneficiary households. Globally, in 2014, migrants sent home $15 billion (excluding the vast unrecorded inflows). For origin households the higher liquidity offered by remittance financing alleviates consumption constraints and finance health care, housing, and businesses.  Household surveys indicate remittance income has helped lower poverty significantly, by 6 per cent in Bangladesh.
Yet, blue-collar migrants find it difficult to instantly shift small-values to their families, at their very moment of need. If migrants employed in low-wage work were to walk into a money-transfer outlet to remit USD50 they would not be able to perform the transaction.
Inflated fee constructs ranging between 8 per cent and 10 per cent of the total transfer value result in migrants remitting funds in larger aggregates to families or using informal transmission mechanisms. Remittances, typically, are transferred in tranches averaging USD 200, usually every six to eight weeks.
A point in comparison, the average size of an in-country transfer to non-expatriate households within the same income quintile as expatriate families ranges between USD25 and USD50, and fulfils the same range of financing needs. There is a need for a financial system, in which consumers can make small-value payments across borders as easily and cheaply as they can within their own countries.
A multilateral approach interlinking multiple mobile wallet systems to establish a “one network” would transform the market and enable monies to be sent from any mobile. By virtue of interconnecting service infrastructure, the network functions as a hub aggregating and directing transactions from multiple sources to respective destinations. Beyond transaction routing, aggregators help build essential rails for remittances by assuming complete responsibility to create a fail-safe and real-time transaction processing environment including sender validation, forex conversion, authorization, reporting and settlement, with flexibility to customise for local markets.
The benefits generated by a “one network” model stems from the power of unifying multiple systems and allows for:
Quick Service Scaling: Participants can implement a single connection to transact with any other partner on the network, thus promoting innovation and the spread of mobile money services.  The “connect once, transact with many” model improves reach, facilitates quick scaling and reduces costs and complexities related to developing, implementing, and maintaining connections with multiple transaction partners. The falling costs offer the chance to bring remittances to even poor and remote populations.
Improved Affordability and Access: By aggregating existing mobile wallet payout infrastructure to build an international transfer network, Terra ensures affordable service access, especially in rural areas. Reducing dependence on physical infrastructure rationalises cost and assures scale, allowing participants to profitably service very high transaction volumes even at very small ticket sizes.
An added cost advantage is that net settlements and aggregated volumes of foreign exchange transactions assure better rates to remitters. As the number of participants on the network increase, Forex can be sourced from upstream market makers, ensuring better rates. Netted settlements ensure costs of international money transfer are lower. Passing on these savings reduces overall cost of remittances.   

Ability to Address Long Tail Corridors: Smaller corridors which generate between USD 1 and USD 10 million in remittance volumes form 50% of global corridors. The low transaction volume makes these corridors commercially unviable resulting in lower competition and higher transfer costs.  The ability to aggregate senders and recipients on a single corridor enables cost-efficiently service delivery  
Assured Security: Due to complete visibility and control over the sending and the receiving side, the model provides the ability to perform know your customer verification of the payer and the payee whilst authorizing the transaction. This creates a foundation for building more reliability, transparency, and confidence in the network. The 360° KYC is a critical step in enhancing regulatory oversight and easing regulatory concerns.  
Incremental Revenues from New Services: The direct credit of monies into the beneficiary’s wallet accounts locates international transfers within a dynamic digital payment ecosystem, engendering the essential shift from remittances being one-time transactional system to becoming an ongoing system of engagement with financially underserved migrant households. Low-income beneficiaries for instance, may receive specific commodity vouchers that can be redeemed at local stores, or migrants employed in seasonal jobs could be offered micro-insurance covers for a small additional premium
Examples of Deepening Engagement: Mobilizing remittances goes beyond channel shifting. Rather the ability to uniquely identify and track customers unlocks several new business opportunities.
Transmitting funds into wallet accounts can help migrants earmark funds for specific uses, e.g., school fee—providing greater control to senders over household expenditure
Leverage the two-sided nature of the payment marketplace connecting individual and market participants across boundaries can help in creation of new services such as crowd-funding or community savings clubs
Linking remittance apps to social networking ecosystems helps create instant reporting and feedback mechanisms for consumers and improves overall services quality
 
The writer is founder and CEO of Terra, a company incubated by Mahindra Comviva.

�One network� model to transform remittance market

In Bangladesh remittances represent a critical source of finance for millions of beneficiary households. Globally, in 2014, migrants sent home $15 billion (excluding the vast unrecorded inflows). For origin households the higher liquidity offered by remittance financing alleviates consumption constraints and finance health care, housing, and businesses. Household surveys indicate remittance income has helped lower poverty significantly, by 6 per cent in Bangladesh. Yet, blue-collar migrants find it difficult to instantly shift small-values to their families, at their very moment of need. If migrants employed in low-wage work were to walk into a money-transfer outlet to remit USD50 they would not be able to perform the transaction. Inflated fee constructs ranging between 8 per cent and 10 per cent of the total transfer value result in migrants remitting funds in larger aggregates to families or using informal transmission mechanisms. Remittances, typically, are transferred in tranches averaging USD 200, usually every six to eight weeks. A point in comparison, the average size of an in-country transfer to non-expatriate households within the same income quintile as expatriate families ranges between USD25 and USD50, and fulfils the same range of financing needs. There is a need for a financial system, in which consumers can make small-value payments across borders as easily and cheaply as they can within their own countries. A multilateral approach interlinking multiple mobile wallet systems to establish a one network would transform the market and enable monies to be sent from any mobile. By virtue of interconnecting service infrastructure, the network functions as a hub aggregating and directing transactions from multiple sources to respective destinations. Beyond transaction routing, aggregators help build essential rails for remittances by assuming complete responsibility to create a fail-safe and real-time transaction processing environment including sender validation, forex conversion, authorization, reporting and settlement, with flexibility to customise for local markets. The benefits generated by a one network model stems from the power of unifying multiple systems and allows for: Quick Service Scaling: Participants can implement a single connection to transact with any other partner on the network, thus promoting innovation and the spread of mobile money services. The connect once, transact with many model improves reach, facilitates quick scaling and reduces costs and complexities related to developing, implementing, and maintaining connections with multiple transaction partners. The falling costs offer the chance to bring remittances to even poor and remote populations. Improved Affordability and Access: By aggregating existing mobile wallet payout infrastructure to build an international transfer network, Terra ensures affordable service access, especially in rural areas. Reducing dependence on physical infrastructure rationalises cost and assures scale, allowing participants to profitably service very high transaction volumes even at very small ticket sizes. An added cost advantage is that net settlements and aggregated volumes of foreign exchange transactions assure better rates to remitters. As the number of participants on the network increase, Forex can be sourced from upstream market makers, ensuring better rates. Netted settlements ensure costs of international money transfer are lower. Passing on these savings reduces overall cost of remittances. Ability to Address Long Tail Corridors: Smaller corridors which generate between USD 1 and USD 10 million in remittance volumes form 50% of global corridors. The low transaction volume makes these corridors commercially unviable resulting in lower competition and higher transfer costs. The ability to aggregate senders and recipients on a single corridor enables cost-efficiently service delivery Assured Security: Due to complete visibility and control over the sending and the receiving side, the model provides the ability to perform know your customer verification of the payer and the payee whilst authorizing the transaction. This creates a foundation for building more reliability, transparency, and confidence in the network. The 360 KYC is a critical step in enhancing regulatory oversight and easing regulatory concerns. Incremental Revenues from New Services: The direct credit of monies into the beneficiarys wallet accounts locates international transfers within a dynamic digital payment ecosystem, engendering the essential shift from remittances being one-time transactional system to becoming an ongoing system of engagement with financially underserved migrant households. Low-income beneficiaries for instance, may receive specific commodity vouchers that can be redeemed at local stores, or migrants employed in seasonal jobs could be offered micro-insurance covers for a small additional premium Examples of Deepening Engagement: Mobilizing remittances goes beyond channel shifting. Rather the ability to uniquely identify and track customers unlocks several new business opportunities. Transmitting funds into wallet accounts can help migrants earmark funds for specific uses, e.g., school feeproviding greater control to senders over household expenditure Leverage the two-sided nature of the payment marketplace connecting individual and market participants across boundaries can help in creation of new services such as crowd-funding or community savings clubs Linking remittance apps to social networking ecosystems helps create instant reporting and feedback mechanisms for consumers and improves overall services quality The writer is founder and CEO of Terra, a company incubated by Mahindra Comviva.