When we hear the words ‘financial institution’, our thoughts automatically turn to banks and large investment companies; however, it is important to also consider those ever so crucial foreign exchange and remittance companies that connect us to the wider world. It is the business of these organisations that I will explore in this article.
The World Bank recorded that the cross border remittance industry amounted to $530bn in 2012, up from $483bn for the previous year. These large figures are made up of corporate international payments from businesses and banks, as well as large volumes of small amounts of money sent regularly by expatriate workers to their families from foreign countries in which they work. As the number of expatriate workers traveling abroad for work has risen, so has remittance, by about eight percent annually in recent years.
The business of remittance
When an expatriate first arrives in their new country of employment, their immediate concern is how they will manage their money and send it back home to their family. Seeing a familiar face in the form of a widely recognised remittance company such as BFC Group and associated products like EzRemit, both of which are popular brands in many expatriate home countries, is reassuring, not only for the sender but also for the receiver.
So often a company’s focus is on the sender, when in reality the receiver is equally as important. Remittance is the link between a person and their family; it keeps people connected and allows them to continue to provide for their family even when they are on the other side of the globe.
These remittances, sent by international expatriate workers from their country of employment back to their country of origin, also play a fundamental role in their home countries’ economies and often make up a significant portion of expatriate household incomes. Remittances pay for education, food, clothing and healthcare – basic sustenance needs. In some cases even a house or piece of land – all of which help to support the home country’s economy. At BFC Group, we understand the importance of ensuring that remittances get back to the country of origin in a timely and secure fashion.
When BFC first started out in the remittance business in the 1970s, it had a draft delivery service of up to 21 days – a relatively speedy transfer time back then. Now, thanks to innovation both within the remittance industry and because of the ongoing advances in technology, we can send money in minutes. The focus of remittance companies today is on the velocity of transactions as well as the convenience factor.
As the world develops, so do people’s needs, and it is the job of remittance companies to make sure these needs continue to be met and to ensure customers are provided with services that keep up with the technological growth of the wider world. Gone are the days of door-to-door remittance where recipients would wait for that ever-important knock on their front door. People now want to be able to have quick and easy access to their money, which has led to the development of products such as Credit to Account, Cash Pick Up and Remittance Cards, by which money is transferred to what is essentially an ATM card and can be used at retail and convenience shops as well as cash machines.
The virtual world also has to be considered when it comes to product innovation. With so many people now with access to computers, smart phones, iPads and more, it is important to move the remittance industry online, to embrace these developments and in some cases challenges. BFC Group has accommodated the move to virtual platforms and altered its business models to stay up-to-date and in touch with consumers and their growing needs by launching a product called Smart Money; an online money transfer service which allows customers to transfer money at any time.
So what dictates the choice between a bank transfer and a remittance company such as BFC Group? Ultimately, the decision comes down to cost, how efficient and convenient it is, and who will give the best rate. The costs associated with sending money overseas with a remittance company are often significantly less than if you used your bank, which is why many opt to use remittance companies when looking to move their money.
Another key difference between banks and remittance companies is that the latter tend to focus on the volume of transactions not the amount being transferred, whereas banks have done their best to avoid the business of transferring seemingly small and insignificant amounts of money because their systems were developed to move larger sums of cash.
This is why you will also often find an additional fee attached to the service when transferring with a bank. Moreover, when using a remittance company, you do not require a bank account, meaning the large number of non-banking members of the population who require such services are undoubtedly going to opt for a remittance company. It is often the case that this group of people are a remittance company’s most loyal and frequent customers.
As mentioned previously, the receiver is an equally important part in the remittance chain. It is the receiver who must make the journey to the nearest agent location to collect their money and it is for this reason that remittance companies build their distribution network in receiving countries into the tens of thousands, to ensure that there is always a convenient location for the beneficiary to collect their money. ‘Agent’ locations, as they are known in the remittance industry, can be in the form of banks but are often likely to be the local convenience store or pawn broker which are normally open beyond the business opening times of the banking world and in closer proximity to the rural towns and villages where the recipient may live.
As the world continues to recover from the economic crisis that has plagued all industries in recent years, opportunities for work abroad have surged, particularly for expatriates from nations such as the Philippines, Egypt, Pakistan and India who have recorded a collective remittance figure of $70bn for 2012. In order to keep up with market growth, remittance companies must continue to expand their networks in both the send and receive countries, as well as working on new initiatives, developing their product offering and ultimately ensuring that they are in a position to continue to best serve the needs of their customers.
The business of foreign exchange
In today’s world of vanishing international borders, open economic policies and increased focus on tourism in many countries, there is a strong and increasing need from different groups of people for foreign exchange products. The main demands for foreign exchange come from three prominent groups, namely:
– Business tourists – who require foreign currencies when travelling to other countries for business related purposes;
– Leisure tourists – who require foreign currencies while travelling on holiday to different parts of the world;
– Religious tourists – who may travel on religious pilgrimages; for example to Mecca and Medina for the Hajj and Ummra pilgrimages.
With the increase in global travel and the correlating rise in the need for foreign exchange, people are looking for efficient and competitively priced currency solutions, whether in the form of physical banknotes, travellers cheques, or the latest trend: pre-paid electronic foreign currency cards. The card, which can be used in millions of ATM machines across the world, comes bearing the VISA or MasterCard symbol and can be credited before travelling with the destination currency of choice, or major currencies such as the US dollar, the euro or pound sterling. This safe alternative to carrying physical cash is secured by a unique pin number and permits the user a convenient and cost-effective method of
Business and leisure tourism is increasing rapidly across the globe, as people are becoming more open to travel. Governments in many countries are taking proactive measures to create and promote infrastructures and initiatives that stimulate the desire and demand to travel to their respective countries. Remittance and exchange companies such as BFC Group can easily facilitate the needs of business and leisure travellers through the efficient provision of a wide range of currencies that are available through a large network of channels, whether in branches or online, at very competitive prices compared to services provided by other types of financial institutions.