Malaysia’s cross-border remittance is going through a renaissance

Malaysia’s cross-border payments industry is going through a , according to experts. Customers who traditionally relied on banks have now started switching to fintech players for sending money to their relatives abroad.

Online cross-border payments companies such as MoneyMatch, MyCash Online, InstaRem (now Nium), Valyou, Tranglo, and BigPay look to leverage on this opportunity.

“The remittance industry in Malaysia is of late going through somewhat of a renaissance, as we are starting to see a lot of innovative solutions spring to life in this sector. This is due to a combination of pragmatic and forward-thinking regulations and the introduction of many fintech players such as ourselves,” said Adrian Yap, CEO of MoneyMatch, a leading remittance platform.

“This is a great time to be a consumer and we see growth happening as more corporate and retail customers choose fintech players over traditional banks,” he added.

Remittance is traditionally a service, wherein customers need to visit their branch or use online banking applications to send money abroad. However, it is expensive and works only during banking hours. Plus, it does not give reasonable forex rate to the customer.

In the past few years, non-banking entities have entered this sector and started to provide money transfer services. They are convenient and cheaper, compared to banks’. However, they are still expensive. “From last year, remittance startups began to offer zero FX margin service, making it cheaper and convenient. This is expected to drive growth,” said Mehedi Hasan, Co-founder and CEO of MyCash Online, a finance marketplace for migrants.

As per a report by the central bank BNM, the total outward flow of remittance from Malaysia to other countries grew to US$852.6 million (RM3.5 billion) in 2017 from US$596.5 million in 2016, driven mainly by its migrant population. While the latest figures are unavailable, this signals a positive trend.

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Globally, remittance is on a high-growth path. As per data, the annual remittance flow into low- and middle-income countries reached US$529 billion in 2018, up from US$483 billion in 2017. The overall remittances, which also include inflows into high-income countries, touched US$689 billion in 2018, up from US$633 billion in 2017. Among countries, top remittance recipients were India with US$79 billion, followed by China (US$67 billion), Mexico (US$36 billion), the Philippines (US$34 billion), and Egypt (US$29 billion).

Remittance companies are also seeing massive opportunities in B2B sector. “We believe the opportunity lies in the SME segment that has somewhat been neglected by banks in general,” Yap continued. “We are talking about SMEs which the banks have deemed to be too small to be granted access to a full suite of services and also are too small to be in a position to bargain with regards to rates and fees. It is a massive and under-served market. It is a market that we are looking to dominate in the near future.”

However, the remittance industry is facing some significant challenges: “The main challenge is the stringent regulation, which at times makes it costly to operate. Secondly, some banks don’t allow remittance startups to open bank accounts. This makes it very difficult. Lastly, illegal competition like hawala makes this market very difficult to survive,” said Hasan.

Creating awareness is another challenge. “Rate of adoption is also challenging when we are shifting from a cash-based society to a cashless one. The speed at which this shift is happening is slower than what I expected. Our goal is to help Malaysian companies become digitally ready for Industry 4.0 by equipping them with the financial tools that they require to compete on a regional front. The challenge would be for them to lets us help them,” said Yap.

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