Remittances have seen significant growth in the Asia Pacific (APAC) region. However, due in part to the current challenges of exchanging money between currencies, this high growth in remittances is offset by the high average cost of sending money.
In order to effectively develop the dynamic regional market with a volume of almost 2 billion transfer transactions per year, it is important to have a global reach with locally relevant service offers.
Businesses looking to offer remittance services need to meet recipients where they are – whether it’s money being paid out to a mobile account or in cash on a remote island. Although the senders ultimately decide which remittance provider to use, the choice is heavily influenced by the needs of their recipient.
Fast speed, high reliability, and low cost are required to remain competitive. The service providers differentiate between the locally relevant coverage and payment options. In the second part of our referral series, we will examine what it takes to grow and win in APAC countries – the Philippines, Thailand and Australia in particular.
Current transfer solutions in APAC
Cash dominates in the Philippines. Although the country recently introduced a low-quality instant payment system that allows users to make digital payments to bank accounts, adoption remains stubbornly low and cash remains the primary withdrawal option for wire transfers. Therefore, service providers need to be connected to the predominant outlets for cash withdrawals, particularly in Cebuana Lhuillier and Palawan.
Similarly, cash transactions still account for a staggering 90% of the domestic payment value of Thailand. In contrast to the Philippines, however, the low-value instant payment rail in Thailand has experienced a much higher level of penetration. PromptPay, launched in 2017, averaged 4.5 million transactions per day in less than two years and attracted an impressive 49 million registered users. As a result, the volume of digital payments increased 83% from 2016 to 2018.
It is important to consider the huge impact of PromptPay in Thailand in order to be successful. While you can go far in the Philippines with a wide range of cash coverage, PromptPay is required as a table insert in Thailand. Offering cash and other wallets in addition to PromptPay can help gain a competitive advantage.
Conversely, the Australian remittance market differs significantly from the Thai and Filipino remittance markets. Australia, in particular, is primarily a sending market for remittances, and the demographics of Australian recipients tend to differ from recipients in emerging APAC countries in that they are often high in financial inclusion, have 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 accessing bank accounts through partners or through the New Payments Platform (NPP). It is important to note that the NPP does not yet offer 100% payment coverage, as the banks are continuing to expand the possibilities for integrating and using the NPP. As Australia is a mature payment market, instant and transparent withdrawals with 24/7/365 availability and fees predictability can provide a premium payment experience.
These solutions are not globally scalable
The challenge with all of the solutions described above is that they are difficult to scale globally. For example, it is difficult to develop the most competitive payment options in each of these different markets without exhausting the working capital and human resources to get there.
As a result, many organizations rely on partnerships to develop these lucrative markets. However, building banking or correspondence partnerships can take a lot of time and energy and ultimately may not guarantee the best possible customer experience. In order to maintain a partnership network, in addition to pre-funded accounts in target currencies, numerous bespoke APIs must be created and managed, resulting in high transfer fees.
Financial institutions need an easy, transparent, and more efficient way to complete cross-border transactions.
There’s a better way: on-demand liquidity
Until now, transfer providers have had to work within traditional, complex payment channels. Today, blockchain and digital asset technologies are changing the status quo. Banks and payment providers use RippleNets On-Demand Liquidity (ODL) as an alternative to traditional pre-financing. ODL uses the digital asset XRP as a real-time liquidity bridge between the sending and receiving currency.
Within seconds, customers using ODL can free up capital, guarantee their customers the most competitive exchange rates, and process global payments at unprecedented speed.
Taken together, the benefits of speed and cost enable those who use ODL to compete more effectively and provide their customers with an easier and more reliable way to send money home. If you’d like to learn how RippleNet’s ODL can help serve your customers better, contact us.