Bangladesh is among the top ten remittance beneficiary economies in the world. Significantly, the small sums of money migrants send to their families equal $15bn annually and contribute 9% to the country’s GDP.
An overwhelming majority of Bangladesh’ 9m migrants are, however, unbanked, resulting in a significant proportion of inflows being routed via informal channels. Mobile-enabling remittances can create a ubiquitous, affordable and secure channel for cross-border transfers.
India-based Terra, a mobile-first global payment network, is set to foray into Bangladesh to make international money transfers ‘as simple as sending a text message”. Ambar Sur, Founder and CEO Terra, in an exclusive interview with the Dhaka Tribune, details the company’s vision and plans for the Bangladesh market and the broader impact of digitisation on the remittance landscape. The interview was taken by Kayes Sohel.
Dhaka Tribune: How does Terra operate in foreign remittance globally and particularly in Bangladesh?
Ambar Sur: Mobile wallet services have taken off with mobile payments users’ outnumbering bank account holders in many markets in Africa and Asia. Digital prepaid payment instruments that first began by offering low-value e-recharge have made inroads to claim larger parts of the customer wallet by providing convenient and secure options for transfers, loans and micro-savings. In Bangladesh, for example B-Kash operates 18 million wallet accounts and processes an approximate $26 million in daily transactions.
The growing usage of mobile wallets presents service providers with an opportunity to interconnect wallets for channelising international peer to peer transactions. Currently, the use of mobile wallets to smoothen global flow of private transfers remains underleveraged on account of the standalone nature of these services.
Terra is building the rails for mobile- powered international payments. We are architecting a new model by interconnecting existent digital financial service providers while assuming complete responsibility for obtaining and/or ensuring adherence to all regulatory requirements for conducting business. Our model predicated on the ability to aggregate available infrastructure supply would generate greater value for customers at lower costs and ultimately expand the industry.
Why is Terra keen to enter in Bangladesh?
Terra is not a new entrant in the Bangladesh market. We have institutional backing from Mahindra Comviva, one of the first global companies to believe in the mobile opportunity in Bangladesh. The company has helped further the vision of Digital Bangladesh by broad- basing mobile telephony services growth. Our e-recharge solutions have made it possible for mobile network operators to profitably cater to customers who spend less than $2 a month, pushing mobile penetration from less than 5% to over 70% of the total populace in the last decade.
Similarly, Mahindra Comviva pioneered mobile payment products for the financially marginalised segments in Bangladesh.
Continuing on this trajectory of innovation, Terra is well-positioned to usher a similar digital revolution for international transfers, a $15 billion market annually. In Bangladesh every third household is reliant on international remittances to fund consumption. Yet blue-collar migrants find it unviable to transfer small sums of monies to their family on-demand and at frequent intervals. There is a strong existent demand for affordable and ubiquitous international money transfer products among low-income migrant households.
Why will consumers choose Terra?
Terra’s tagline is “Transfer Happiness”. Remittances function as an economic as well as an emotional lifeline for migrant households. When a migrant sends a gift to his daughter or pays a bill on behalf of the family, the act of transferring money is fundamentally an act of delivering happiness to loved ones.
From the perspective of a financial services network, a consistent, reliable and transparent services experience reinforces the positive emotion and creates a base of satisfied customers. Beyond the immediate transactional experience, we have expanded the contours of our core value to encompass economic security. Accordingly, we empower customers to better manage their financial lives by bringing relevant, innovative propositions to the market. For instance, an ability to bundle asset-based products ---- micro-savings and micro-insurance ---- with international remittances expands Terra’s role in our customers’ personal financial ecosystem, creates differentiation and increases attractiveness of our service relative to competitors.
A large proportion of the money is drained away by the transaction costs of sending money internationally, especially in the developing countries. What do you think about it? Please share some data?
Annually, beneficiary households in Bangladesh lose $1.5billion or 10% of total remittance volume in transaction fee. The high fee structures to transmit monies create a disincentive for use of formal channels. A cost-impact analysis, however, also needs to factor hidden, non-monetary expense incurred by beneficiaries in terms of lost productivity and time spent on travel. A study of non-monetary benefits conducted by Terra Research teams indicates for every percentage shift to mobile transactions, the country gains $20 million in monetary terms.
How will Terra help reduce the cost of money transfer?
Terra is rewriting the rules of international remittance from being a high-value, low-volume business to becoming a low-value high-volume business. Transferring money is expensive on account of limited inter-connectivity between financial institutions and mobile wallet schemes. By bridging mobile wallet islands, Terra further improves the economic viability of micro-remittances as critical services infrastructure including extensive agent networks, regulatory and compliance costs are shared among scheme participants.
Is Bangladesh’s present infrastructure enough for Terra’s operation?
Bangladesh has a long history of encouraging digital innovation to expand financial services access among unbanked segments. In 2015, Bangladesh crossed the 25 million mobile money customer mark. A fast maturing domestic mobile payment ecosystem has created fertile conditions to launch services that enable customers to text money from any global location. With a distinct focus on building a cash-lite economy, the central bank is creating an enabling policy framework for remittance initiatives that actualise the potential of the mobile.
Who are Terra’s competitors?
The digital transformation of remittances is central to Terra’s vision, mission and competitive strategy.
Founded with the vision to create a global network for micro-transfers, our defining tenet is; “Send Money to Any Mobile.”
For actualizing our vision, it was imperative the company clearly define competition. Rather than classify competitors narrowly as other money transfer companies, who collectively have a 25% share of the market, Terra is focusing on the significant 75% dominated by cash.
Cash is our primary competitor and has propped and supported a substantive informal remittance market for decades. The wide use of cash has severe, negative ill-effects, as it prevents economies from effectively deploying remittance receipts for overall development.
Lowering the preference for cash among migrants and providing simple to use, universally available, cost-efficient mobile-powered alternatives can boost domestic financial sector earnings. In addition, using mainstream channels for remittances would bring households into contact with other formal financial services, including savings, loans, mortgages and insurances and foster economy-wide financial inclusion.
What’s Terra’s market share globally and in Bangladesh?
Globally and in Bangladesh, mobile-powered international remittances are at an early stage of growth. Currently, the share of mobile among formal remittance channels is a modest 2%. With 300 mobile wallet services available globally and a growing interest among financial regulators to use mobile for international remittances the pace of growth would accelerate.
Terra services are commercially available in the GCC and the Philippines. We are in the process of launching in two other South Asian countries by March 2016. We are also conducting trials in four other countries in Africa.
In the next twelve months, the positive network effects generated by integrating mobile wallet services would trigger a virtuous cycle of growth, attract more partners and customers onto the network, propelling Terra into a leading market position in the international mobile transfer market.