This article first appeared in Enterprise, The Edge Malaysia Weekly, on November 12, 2018 – November 18, 2018.
For many Malaysians, mobile wallets are simply a convenient payment platform that comes with perks such as discounts and cash back for every transaction. But for the migrant worker community, mobile wallets can be a vital tool for remittances.
Mobile wallets are particularly useful for workers from countries where mobile wallet usage is widespread, such as Pakistan and Bangladesh, says Prasanna Rao, CEO of Valyou Sdn Bhd. The remittance service provider is a subsidiary of Norway-based Telenor Group. Valyou has introduced the first mobile wallet-to-wallet method of sending remittances from Malaysia to Bangladesh and Pakistan.
"Wallet-to-wallet is a unique route … and we have seen that it is really appreciated by customers from mature markets (for mobile wallets) such as Bangladesh and Pakistan. It has to do with the banking penetration there," he says.
Malaysians, being 90% banked, would not understand the urgency. "Wallet adoption here may not be immediate until there is some kind of incentive," says Rao.
According to the Global Findex Database 2017, Pakistan and Bangladesh are among seven world economies with the largest unbanked populations. Bangladesh has seen the number of adults with mobile money accounts jump from 3% to 21% from 2014 to last year, and more than half of Pakistan's adults own mobile phones.
Valyou has set up partnerships with mobile banking service provider, Easypaisa, in Pakistan and with Mutual Trust Bank and Dutch-Bangla Bank in Bangladesh, enabling access to the bKash wallet and Rocket mobile banking platform. The convenience offered by a mobile wallet is that users do not have to visit automated teller machines (ATMs) to obtain or deposit cash, as these machines may be harder to find, especially in the countryside.
"Just to give you an example. One particular bank in Bangladesh has only 12,000 ATMs but 180,000 cash-out points for a wallet operator. And anyone can go to a mobile top-up outlet and cash out from there," Rao says.
Valyou is currently in Malaysia because of the large number of migrant workers here. According to a report by RemitSCOPE on Asia-Pacific, last year, Malaysia was the fourth highest source of remittances in terms of amount.
Rao is eyeing Cambodia and the Philippines next. Once the mobile wallet market becomes more mature in those countries, the company will extend its wallet-to-wallet remittance service there.
"We believe the mobile wallet is the right game to play because it is convenient. Adoption is just a matter of time — as awareness rises," Rao says.
Valyou is not the only remittance player offering wallet-to-wallet services globally. Alipay provides the same type of service for migrant workers to send money from Hong Kong to the Philippines; Moneygram provides the service for migrant workers from Kenya, Tanzania, Romania, Ghana and Zimbabwe. Several remittance service providers offer digital means of sending money from the phone to bank accounts and cash pick-up locations.
The move to digital channels is driven by recognised weaknesses in traditional remittance services. Constrained by office hours, migrant workers may have to take leave to visit remittance counters on weekdays. Otherwise, they might have to wait in long queues on weekends. Some migrant workers rely on informal channels to send their remittances, where the money is handled by unlicensed operators, and they risk losing it.
"These were the gaps we observed based on a survey before we started the financial services business. When I was at Digi Telecommunications, we hired an independent company to do a survey for us so we could understand the pain points of migrant workers and of those who do not have bank accounts," he says.
Rao, who spent over nine years at Telenor India and Digi Telecommunications Sdn Bhd, got into the financial services market after the telecoms operator recognised the opportunity to cater for underbanked and unbanked migrant workers. When Valyou was set up in 2016, it bought over an existing remittance service provider.
Valyou also offers the usual remittance services that send money to bank accounts, through cash pickup agents and home delivery service, which is popular in Vietnam, Rao says. But ever since it introduced the wallet-to-wallet service two years ago, about 50% of its transactions are now from this digital channel.
"We have doubled our market share (since 2016), driven primarily by the growth in digital or mobile wallet usage. We are clearly the market leader in that space because we are the only ones providing mobile wallet (remittance) services (in Malaysia). In terms of the overall remittance market share, we are in the top three," Rao says.
Valyou users have to first register by visiting Valyou representatives in selected locations around the country. As the company is still in the process of obtaining an e-KYC (Know Your Customer) licence, users have to provide their national ID and six mandatory details in person to a Valyou employee.
To convert physical cash to e-money, one can use an ATM or visit the over 2,000 Valyou cash-in merchants around the country. The merchants are mostly telecom top-up outlets who were subject to a stringent selection process.
Users can check the status of their transaction on the Valyou website using a reference number. The receiver of the remittance can get the money transferred directly to a bank account, obtain home delivery or cash out from any of the mobile wallet cash-out merchants in their country.
The charges are similar to the rates offered by conventional remittance providers, according to Rao. "Because there is an offline to online component, I need to incentivise the merchants to encourage them to cash in remittances. Once the volume really picks up and customers move from online to offline, they will start transferring money digitally (through ATMs). Then they don't have to depend on merchants and I can pass on those benefits to customers. In another one or two years, most foreign workers will go to ATMs or connect their debit card to mobile wallets," he says.
The Valyou mobile wallet is secured by a six-digit PIN, which is connected to the user's mobile number. Registration must be done by the user in person. The transfer of money between Valyou and the partner banks is regulated by the central banks of both countries, Rao emphasises.
Even if Valyou is able to offer e-KYC services in the future, the process will be stringent. "Bank Negara imposes a few conditions. For example, you cannot use a photograph to register, you need to prove that you are live in front of a camera. You will be asked to make a couple of gestures, maybe shake your head or smile. The system will auto detect these gestures and move to the next task. So I cannot use your IC to register without you knowing. They will also take a photo of you and match it against your IC," he says.
In September, Valyou launched the Valyou Online service, targeting white-collar workers who want to send remittances. Users can connect their bank accounts to Valyou and send the money without having to pay any additional fees. Rao says, so far, there are almost 500 registrations, many of which are from the Philippines, Pakistan and India.
"As we move along, if we have volume, we should be able to extend this offer and we can earn from the exchange rate," he says.
Valyou's competitors also provide these services. "Within conventional banking, you can send money overseas through online banking or at your bank branches. These days, most banks are also international remittance agents to global remittance service providers like MoneyGram and Western Union but the bank's exchange rates and fees are still expensive for most remittance customers in Malaysia as money remittance is not their core business. So that's where money services businesses (MSBs) like us come in. As a non-bank money service provider, we are able to provide remittance at a fraction of the costs charged by banks and at far more competitive exchange rates," Rao says.
In addition, Valyou is looking at allowing users to pay bills and purchase insurance on the app. The latter is targeted at migrant workers, many of whom may not be sufficiently insured.
"We are looking at healthcare insurance that they can buy for themselves here and also for their loved ones who are elsewhere. This is subject to Bank Negara Malaysia approval," Rao says.
Digital health is already a segment that Telenor, Valyou's parent company, is exploring in Bangladesh. Through Tonic, a product of Telenor Health, users can obtain health information and services through their mobile phones, including 24/7 access to a doctor.