2 TH Global Remittances Working Group Meeting Washington D.C., 2 April 217 Reduction in Remittance Cost for Money Services Business A Malaysian Experience Nik Mohamed Din Nik Musa CENTRAL BANK OF MALAYSIA 1
RM bil Regulatory reforms in 211 saw remittance growth spurred in Malaysia 3 2 1 216 Outward Remittance Corridors Bangladesh 22% Indonesia 31% Outward Remittance by Banks and Non-banks 25: Introduced licences for non-bank RSPs Banks Source: Bank Negara Malaysia (Jan 217) Nepal 15% India 1% Philippines 6% Others 16% MSB Act 211 & principal-agent framework Non-banks South East Asia most diverse remittance market Malaysia with largest outward remittance: 216: over 2 million migrants total: US$9 billion 37% by banks 63% by non-banks 2,7 access points for remittance Why regulate remittance industry? Financial inclusion, curb illegal operation 25: new remittance licences 211: higher trajectory due to new Money Services Business Act proportionality in regulation rationalization of licences principal-agent increased accessibility 212: introduced nationwide Association bridge between regulator and industry 2
Road to remittance cost reduction, aimed at low cost environment below 3% 3, 2,5 Prior to transformation 2, 1,5 1, 5 1,543 1,56 1,64 1,928 2,25 4.7% 2.99% 3.15% 3.4% 3.14% 839 734 54 2.49% 426 2,392 2,656 2.67% 2.85% 2.2% 38 354 21 211 212 213 214 215 216 Access points Regulatory reform Avg. cost (Industry) Greenback 2. No. of licensees Avg. cost (JB City) % 8 7 6 5 4 3 2 1 Motivation for low remittance cost: - savings translates to more wealth for the receiving country (1% = USD6m) Regulatory reforms led to increased access points by 72%, cost by 1.2% - competition with higher access points 216: 2,7 (211: 1,56) - greater reach to underserved areas - bigger players, hence scale economies minimum capital increased consolidation (211: 839; 216: 354) 215: Greenback (JB City) cost further by 2% lower than national average - greater transparency and competitiveness World Bank s Pick Remit app - awareness on use of authorised channels 3
RM mil Key success factor: collaboration with World Bank 3, 2,5 2, 1,5 1, 5-2.49% 2,448 1,745 37 4 35 27 3 25 2.2% H1 216 H2 216 2 15 1 5 Pick Remit No. of download Remittance cost JB B2B Remittance value Milestone achieved in improving transparency and efficiency in JB CIty - reduced remittance cost (215: 2.49%, 216: 2.2%), lower than industry rate - highest downloads of Pick Remit app worldwide in 216 (4,193 downloads) - 55% increase in B2B remittance - >11, migrants & 1,3 SMEs engaged - >17, new registered customers Demography barrier: Various nationalities of migrants with different level of education, languages & backgrounds Participation issue: Ways to attract migrants and SMEs to participate in the program Trust issue: Perception of migrant workers towards Banks and remittance companies Effective collaboration with strategic partner: World Bank, Industry players, Embassies, Council Customised approach: Tailored education & awareness program based on target group,.e.g. trained native speakers appointed as ambassadors to educate migrant workers High accessibility to Pick Remit: Majority of migrant workers has a smart phone with internet access 4
Way forward: can we further reduce cost to 1% and maintain sustainablity? Leverage on FINTECH such as Peer-To-Peer (P2P) Leverages on mobile app to provide ubiquitous access Illustration of P2P model for cross-border remittance Sender 1 Sender 2 74% of migrant workers have access to smartphone 9% use smartphone for internet FINTECH s bank acc. 1 (Singapore) FINTECH s bank acc. 2 (Malaysia) Expansion of e-remittance services Digital solutions to enable cashless services, incl. e-kyc Payment of salaries of migrants through e-wallet or banks Encourage e-remittance offerings by industry players Promotion for B2B transaction via non-bank RSPs Nationwide awareness programmes in other cities (SMEs) Set targets for non-bank RSPs to achieve higher volume Intensify surveillance & enforcement on illegal operators Facilitate migration of users of informal to formal channels Review legislation for swifter & efficient enforcement Receiver 2 Receiver 1 - Sender 1 sends SGD9 (RM27) to Receiver 1 and transfers the money into FINTECH bank account 1 - Sender 2 sends RM3 (SGD1) to Receiver 2 and transfers the money into FINTECH bank account 2 - Receiver 2 paid out from Singapore account and Receiver 1 paid out from Malaysian account - FINTECH company pools monies from multiple senders and receivers and makes local payouts with minimal transfer of funds across borders (i.e. SGD 1) 5
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