Danai Pathomvanich
Aug 26, 2014
Danai Pathomvanich looks into lucrative overseas remittance opportunities
The arrival of ubiquitous internet networks and low-cost access hardware is creating tremendous overseas remittance opportunities for ASEAN entrepreneurs and investors.
Throughout ASEAN, entrepreneurs and investors have suddenly realized that large financial institutions are realizing huge revenues and profits from overseas remittances regularly sent by millions of migrant workers.
Regional entrepreneurs and investors are now contemplating how they can use their local knowledge to carve their own niche in this very lucrative market.
High remittance fees
These remittance services have been dominated by large financial institutions and companies such as Western Union that may charge services of as much as 20 per cent for each transaction.
A recently published World Bank’s Migration and Development Brief indicates the although average fees for remittances globally are about nine per cent, a July 2014 Fast Company article indicates that Western Union charges an average of 15 per cent per transaction.
Inconvenient for remote area recipients
Although costs are relatively high especially for migrant workers that may remit several small payments monthly to their relatives in the region, a greater problem is accessing the funds in remote areas that are underserved by financial institutions.
Many remittance recipients often must find transportation or walk several hours to the nearest financial institution to pick up the much-needed funds.
However, today with the arrival of ubiquitous internet networks that can be accessed with low-priced hard-ware many regional entrepreneurs and investors are beginning to exploit the opportunities. They are carefully analyzing how they can efficiently and cost-effectively deliver his much-needed convenience.
In Canada, a recent Vancouver Sun article on August 1, 2104 indicated how the remittance business has evolved in the West. Remittance centers, the journalist Douglas Todd said are on almost every commercial street in the city – “….in grocery stores, hair salons, florists, post-office outlets, Safeways, Walmarts and even sports bars.”
Potential opportunities massive
Globally, the World Bank estimates the developing world is expected to receive $414 billion in migrant remittances in 2013, an increase of 6.3 percent over the previous year. This is projected to rise to $540 billion by 2016.
The world’s 232 million international migrants are expected to remit earnings worth $550 billion this year, and over $700 billion by 2016.
In Thailand, the same World Bank reports estimated remittances of $US5.5 billion from migrant workers in 2013.
More importantly, overseas remittances to Thailand have risen sharply at an average of 25 per cent per annum in the past five years, compared to annual increases of only 5 per cent between 2004 and 2008.
These Thai workers who regularly send home remittances are “circular migrants” who move back and forth between their high-income host country and generally low-income homeland.
The World Bank says these “temporary foreign workers” are responsible for two-thirds of all remittances.
By exploiting new internet-based opportunities, ASEAN entrepreneurs and investors are also tackling deep-rooted social issue attached to high-remittance costs.
The World Bank Brief said that the high cost of sending money through official channels drastically reduces amounts of much-needed funds for developing-country recipients, especially those living in impoverished rural areas.
With these apparent opportunities, are ASEAN entrepreneurs and investors looking in the right direction?
Fast Company noted in July that the current overseas remittance opportunities are in the bulls-eyes of many social media companies such as Google and Facebook that have been working for several years to use their platforms to attack the market.
The article noted that “…money transfers by a foreign worker to family back in her home country–might potentially be “more lucrative than a pure payment play.”
