Succeeding in the competitive money transfer industry - A case for ORMB
Posted by Gautam Begde, Lead Consultant, Oracle Practice, Infosys
Money transfer is a large industry that generates significant business revenue. A World Bank survey stated that over US $580 billion was remitted globally in 2014 and this value is expected to reach US $600 billion by 2017.
Traditionally, the money transfer industry has been dominated by brick-and-mortar stores that offer money transfer services through agents. However, the proliferation of the Internet and smart phones has created a new breed of digital money transfer providers that are changing the industry's competitive landscape. These players can provide money transfer services at lower average cost and much faster. These trends, coupled with emerging business models that cater to untapped market segments, are disrupting the money transfer industry and becoming a formidable challenge for existing companies. Let us take a look at two of these new business models:
- Bitcoin-based money transfer - Bitcoin is a digital currency that can be transferred independent of banks and without transaction fees. As the bitcoin industry matures and complies with regulatory standards, it can become a valuable tool to serve the 'unbanked' sector (mostly for senders). The unbanked sector engages in frequent transfers of small amounts of money, typically less than US $200, and bitcoin is becoming a key player by offering instant and cheap mechanism for money transfer and in the process also minimizes currency volatility risk. Thus, the bitcoin industry is set to expand business reach by integrating untapped markets into the mainstream money transfer business.
- Alternate remittance mechanisms - Many countries that want to tap the 'unbanked' sector have experimented with alternate remittance mechanisms. These offer 'banking-by-phone' money transfer services such as m-Pesa in Africa and India that use basic mobile handsets instead of smart phones. As the penetration of mobile phones increases across the globe, this method is gaining popularity. For instance, 50% of Indians, i.e., over 600 million potential customers, do not have a bank account. To improve the financial inclusion of these individuals, the Indian government has granted licenses to payment banks that will also provide remittance services.
To succeed in such a competitive marketplace, money transfer companies should focus on meeting the expectations of all their stakeholders, i.e., money transfer agents, digital providers, governments, regulatory authorities, consumers, and employees. This involves significant challenges that call for a well-planned corporate strategy supported by technology. Organizations need a robust and flexible software platform that drives business agility and responds to the dynamic nature of this industry. In the next blog, we will talk about how Oracle's financial services revenue management and billing (ORMB) platform shows the way forward.
To know more about ORMB, visit us at Booth #1101 at Oracle OpenWorld 2015. Infosys is a Diamond sponsor at the event.