In my blog last month I mentioned that many people were not aware that all international payments, even those originating from mobile networks, all have to go through the banking system at some stage to comply with stringent laws around international money movements and anti-money laundering.
Here at least, the banks and telcos are working together, more probably out of necessity than choice. Intra-national real-time transfers, free from these restraints, firmly put the advantage on the telco side with their existing network of pre-paid minute sellers and dealers, but international transactions are a different matter altogether.
I have since discovered a great example of a bank and mobile operator working together to jointly offer an international remittance product that can be triggered from any mobile handset, and comply with all regulations.
Citibank in Malaysia and mobile operator, Digi (part of the Telenor Group), have been operating DiGiREMIT™ that facilitates remittances via the simplest and most reliable of methodologies – good old SMS - since 2007.
In what appears to be a product tailored to foreign workers in Malaysia wanting to remit salaries to families at home, the service is available to all DiGi prepaid and post-paid subscribers Money can be held in a virtual wallet for transfer anytime, from anywhere. Remittances to Indonesia, Philippines or Bangladesh are possible already, with more countries to follow.
Marketed as ‘Your personal money transfer service on a mobile phone,’ this simply means no more visits to banks or agents for money transfers. A broad range of DiGiREMIT™ outlets, including Digi dealers, are open longer hours and at more convenient locations.
All customers need do to take up the service is visit an authorized outlet with an original identity document. After registration, they top up the DiGiREMIT™ virtual wallet with cash or transfer funds from any bank account via GIRO (interbank transfers). To complete the registration form, details of the beneficiaries (name, account no or ID no, etc) are added.
Migrant worker remittances are often a large source of national income for recipient countries. According to Citibank research, Malaysia is a major source of migrant income in the Association of Southeast Asian Nations (ASEAN) with total migrant remittances estimated at more than RM 5 billion (US$1.6 billion) a year.
In an interesting twist, Albern Murty, Head of Product Management at DiGi stated that, “DiGi’s strategic alliance with Citibank guarantees the security of remittance transfers. Our customers will have peace of mind knowing that their money is 100 per cent safe.” This appears to emphasise the point that if you don’t trust your telco alone to handle these payments then you can’t go wrong with both being involved.
But it’s the Terms & Conditions of the service that really bring home the benefits of a joint approach. They are emphatically ‘finance regulation’ centric and leave no stone unturned. For a telco to understand the complexity of international financial regulations and then adopt them it may be a much cheaper and faster option to go the partner route.
One last area that is not clearly defined in any documentation around the Digi/Citibank relationship is how the revenues are shared. There is obviously a cost to the end-user but what is it calculated on and who actually bills and collects the revenue and then distributes it to the other partner? It would be a fatal mistake to assume that Digi, being a telco, is the partner with the most sophisticated charging system because banks like Citi have adopted some very clever transaction charging models of their own.
Where the funds are held is also an interesting question. Even prepaid balances and mobile wallet contents need to be ‘banked’ somewhere. Get my drift? For both parties there appear to be considerable benefits – including ‘stickiness’ and ‘value’ for Digi customers and a potential new banking customer for Citibank, or at least transaction revenue from a source it would not previously have been able to tap.
I suspect we will be seeing many more of these strategic relationships developing. Could make for some interesting market watching.