18 June 2024

Cross-border remittances

| The European |

There is no denying the fact that developing countries are heavily dependent on home-remittances from their countrymen working abroad. These remittances are the primary source for increasing foreign exchange reserves of those countries. In this modern-era, banks & money transfer/exchange companies both try to facilitate cross-border payments and ensure minimum friction (shorter transfer times, lesser transfer charges and more transparency during the fund transfer process). Money transfer companies are leading the charge at the moment.

Despite the geopolitical turmoil taking place in Middle-East, it is not all over for economic hubs like UAE. Indians dominate the expat-category trading businesses as well as labor workforce. The data obtained from statistics published in Quarterly Review of Central Bank of the UAE (Q1,2018) states that the “total” (Banks & Exchange Companies) workers’ remittances outflows in the period of January-March 2018 was recorded AED 43.5 billion, an “increase of 17.4% or AED 6.5 billion” compared to the same period of 2017 (AED 37.1 billion). The Indian share of this total amount is 36.7% (AED 15.96 billion).

The interesting thing to note is that 71% of this “total remittance amount” was remitted back home through Exchange Companies. (Source: Central Bank of the UAE)

It is from this country that the UAE Exchange (www.uaeexchange.com) made a humble start. Founded in 1980, having presence in all of 7 Emirates of the UAE, it has close to 150 branches in the UAE. Additionally, it has 17 branches within Dubai Metro stations. (Source: www.uaeexchange.com) Not only is it one of the most recognized names in the UAE but it has evolved in a unique way in the global cross-border payments market.

In January 2015, BR Shetty (Chairman & Founder, UAE Exchange) acquired Travelex (a UK based currency exchange and money transfer company). Continuing with the expansion strategy, in May 2016, a partnership was created with World Remit (a UK based money transfer company). World Remit benefitted from UAE Exchange’s presence in Africa and the combined business flourished. The ride did not end there. The merger of the UAE Exchange and Travelex was brought under the umbrella of a holding company named “Finablr”. Non-UAE operations of the UAE Exchange were rebranded as Unimoni (www.unimoni.com).

Finablr, based in the UK, plans to support expansion efforts by its divisions including $250 million to $300 million in acquisitions and strategic investments by the UAE Exchange unit. The financial group competes for a slice of the global remittances market, which is dominated by 266 million migrant workers who sent a record $466 billion to developing countries last year, according to World Bank data.

Finablr, the holding company for businesses including Travelex Holdings Ltd., and the UAE Exchange Centre LLC, is weighing a share sale in London as early as next year that may value the business at billions of dollars. Evercore Inc. (USA) has been hired to advise on a potential initial public offering. (Source: Bloomberg)

The UAE Exchange is aiming to “increase its share of the global remittance industry to more than 10 percent by 2020”, its Chief Executive Promoth Manghat told Reuters last year. Manghat said that the target was on track and the company had used about 40 percent of the $250-300 million it had earmarked for acquisitions and investments. (Source: Reuters)

Foray into the Blockchain Industry:

This is by far the boldest move made by Finablr. In February of this year, it partnered with Ripple, a San Francisco based Blockchain FinTech Company. Ripple is the world’s only acclaimed “Enterprise Blockchain Solution” for global payments. RippleNet – as it is called, represents the financial institutions, including leading banks that are partnered with Ripple to utilise their suite of blockchain products. The solutions offered by Ripple enable cross-border money transfers that take only 3 to 5 seconds and at a fractional cost.

Being one of the early adapters of Blockchain Tech, Finablr will surely have an edge over its competitors. Only time will tell the global positioning of this money transfer giant!

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