Global money transfer company Western Union expanded its digital services to the UAE as the Emirates amends its regulatory landscape to ease the flow of remittances.
The US company, which has more than 900 retail agent locations in the country, rolled out its mobile app and updated its online platform in association with local partner Al Fardan Exchange – becoming the seventh nation in the Middle East to offer the services.
Odilon Almeida, president of global money transfer, Western Union, says the UAE is the second-most important market globally for person-to-person remittances with changes to the country's regulatory landscape on the acceptance of debit cards and electronic know your customer (KYC) – where a customer can be identified digitally rather than in person – will "change the dynamic".
“I see a lot of effort from the regulatory framework in the UAE to become digital,” says Mr Almeida. “For the UAE to get its full potential on inclusion, two things are very important today - the electronic KYC and the ability to accept debit cards.”
Outward personal remittances in 2018 reached Dh169.2 billion, an increase of 3 per cent or Dh4.8bn compared to 2017, according to the Central Bank of the UAE. It said Dh30.4bn in remittances were transferred through exchange houses with Dh9.5bn wired from banks.
It is the bank transfers market that digital service providers, such as Western Union, are looking to capture. Its digital offering is already available in over 60 of the 200-plus countries and territories the company operates in. In the final quarter of 2018, 12 per cent of Western Union’s global revenue originated from digital and about 75 per cent of digital transactions started on a mobile phone, according to Western Union general manager and regional vice president for Middle East and Africa, Alexandru Badulescu.
Mr Almeida says in the company’s retail business, where the transaction originates with cash, the segment continues to grow around 1 per cent globally year on year.
"This is a big thing because we are saying cash continues to grow, it’s not going down,” he says. “But digitally, where the transaction starts in an account, that is growing at 20 per cent year on year. So our strategy is quite clear, we have a very high participation in retail globally and we want to fight and maintain this - but it is about run, run, run in digital.”
With 88 per cent of the UAE made up of expatriates, according to World Bank data, the exchange service was keen to launch its digital services here but says it targeted markets that are more prepared to launch digital first.
“If you go to the US, the UK or Canada, you can load your documents on the internet and send those right away. We still don’t have this in the UAE and we are working with the partners and with the regulatory framework of the UAE to try and develop that and I know that the regulatory framework is getting there,” says Mr Almeida.
UAE customers currently using Western Union’s app must enroll first and then present their identity documents at an outlet to ensure they have been identified.
Those looking to transact digitally then have two options, sending money via direct debit with the transaction starting in the Western Union app before the customer is directed to their own mobile banking service, which authenticates the payment. For the second option, customers can push funds to the app from their bank via Western Union’s digital partner Al Fardan Exchanges. Paying by Apple Pay - an option elsewhere in the world - is not currently available in the UAE.
“It [Western Union's app] allows people to use it from their home, from their office without having to visit the branch. They can do it 24 hours a day which is not possible in the physical world” says Mr Badulescu, adding that those who want to lock in a rate and pay later in cash can book it online and then visit a branch within a designated time - a service that will also be available on the app at a later date.
While Western Union transfers come with a flat-fee of Dh15 and no charges incurred by the beneficiary, Mr Badulescu says those customers looking for the most competitive exchange rate should use the app rather than physically going to a Western Union point of sale.
However, to capture a larger market share in the UAE, where it has offered transfer services for over 20 years, Western Union says the ability for customers to transfer money digitally using a debit card would be a game changer; according to UAE regulations, debit cards cannot be used for digital money transfers, they can only be used at a physical branch.
While the typical Western Union customer in the UAE at a bricks and mortar location is from India, the Philippines or Africa, Mr Almeida says it changes when you look at digital.
“When you get to bank accounts, then you also touch the locals and that expands the market for us significantly. Imagine if you ask them to go to a point of sale to identify themselves and then do the first transaction – it’s very cumbersome compared to all the other options around the globe," he says. “That’s why electronic KYC is critical and the debit card is critical because that segment has debit cards and [they] don’t want to go to a location to start sending money straightaway.”
In December, Abu Dhabi Global Market, the emirate’s financial centre, said it had concluded the first phase of a pilot project called the electronic Know-Your-Customer initiative to make it easier for UAE financial institutions to comply with global KYC rules to combat money laundering and other financial crimes.
“By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered for financial institutions in the UAE,” said Richard Teng, chief executive of the Financial Services Regulatory Authority, the regulator of ADGM, at the time.
Online debit card payments may also change this year with the anticipated rollout of the government's Emirates Wallet initiative which will replace notes and coins with digital money in a new cashless payment system.
“We are waiting for [Emirates Wallet] and following up on that every day,” says Mr Almeida, adding that he understands that KYC will also become an expected practice in the UAE soon as well. “Today, the Middle East is catching up with the pro-digital regulation and the electronic KYC and anything that can help us accept debit cards is very important."
With Western Union now offering online services in seven Middle East countries including Bahrain, Jordan, Kuwait and Lebanon, Mr Almeida says it delayed its regional launch as it waited for nations to be digitally ready.
“We are not going to launch for the sake of it – we want to launch when we think we can provide a good customer experience and then we can scale it up, so if you still don’t have the regulatory framework ready then we don’t want to rush. So we waited a little bit more for the Middle East because of that.”