On this week’s episode, Taneia chats with Yogesh Sangle, global head of Nium’s consumer business on remittances and what fintech platforms like Nium are doing to break currency borders. Yogesh also talks about why Nium’s remittance-as-a-service solution might just be the strategic tool your business needs for its financial arsenal.
Listen to the podcast above or read the transcript below.
Taneia Bhardwaj: Great to have you on the show, Yogesh. As someone who has been a payments veteran for over two decades, I thought we could start off by getting your perspective on the evolution of the remittance industry. What would you say have been some of the key drivers of growth?
Yogesh Sangle: Hi Taneia, great to talk to you. That question is super relevant in today’s age where things are moving really rapidly. I think the remittance industry has seen more changes than any other industry in the fintech space.
If you look at most of the startups that came in early through the fintech boom, they were all focused on remittances. I think remittances have evolved. It’s been as old as money and people have been using remittances through both formal and informal channels. It is a market which has seen year-on-year growth for almost 17 years, apart from a two-year period in between.
I think the market has dynamically evolved – from people using just two channels to now having multiple choices to send money. This has also helped to bring down the cost of remittances dramatically.
One of the biggest challenges outlined by World Bank, which studies remittances closely, has been the high cost of remittances. Until a few years ago, it was as high as eight percent. Now it has come down to four percent, but four percent is a lot of money for a poorer person sending money back home.
I think companies such as ours have come in and really disrupted the market. And because of that, I think with folks like Nium and InstaReM, we’ve been able to really bring down the cost of remittances and make the experience pleasurable instead of the stressful experience that the customers have had before.
Average Costs of Remittances by Type of Provider, 2019 Q2
Source: Calculations by World Bank-KNOMAD staff for 2018 Q4 based on the Remittance Prices Worldwide database, World Bank. Note: MTO = money transfer operator.
TB: The COVID-19 crisis has also accelerated the shift to digital remittances. To your mind, is this a sign of a structural shift in consumer behaviour? Is the increased activity spurred by the extraordinary circumstances that we find ourselves in?
YS: I think it’s a mix of both. I think we’ve seen a structural shift of people moving money online given that you’re not able to go outside and physically send money from outlets. That’s one good thing that has happened and that’s not going to go away because once you’ve experienced the convenience of doing a transaction in a few clicks and the rates, which are really good as compared to the physical outlets, I think those customers aren’t going back. For us, that’s kind of a permanent shift that we’ve seen.
But apart from that, a lot of people have used this period to transfer money across borders and we’ve gained from that. People have moved money for investments, safe haven or to bridge gaps in funding, that have been created because of the situation. I expect some of that to peter down. We’re seeing some trends in April after a massive month of March. But having said that, the fundamentals remain sound.
TB: Talk to us about Nium’s remittance-as-a-service (RaaS) offering. What are some of the problems that it’s looking to solve?
YS: Well, Prajit, our CEO, loves to say that everybody wants to be a fintech. You have Apple launching a card and wanting to do payments seriously. Google’s card designs were leaked a few days ago. There’s been a lot of talk about everybody wanting to be a fintech. Anybody who is a big brand, wants to be a fintech.
When you look at Nium, it is the nuts and bolts and the infrastructure on which you can really accelerate your path to being a fintech. For example, if you are a large partner who’s getting a lot of remittances into a particular country, I think the Nium platform offers a unique opportunity for you to send money out of countries on your own.
So basically using our licenses, our world-leading technology, our award-winning infrastructure and great customer service and experience, you can just plug and play with our product and build your brand on top of it, which clearly helps you go to market very quickly and start servicing the customer journey on both sides. This also enables you to offer something more to your customers if you have a large customer base.
That’s what RaaS, or remittance-as-a-service, offers. It makes it more accessible for companies to become a remittance provider or providers of payment services. They can achieve all this in a very simple, easy manner. That’s what we offer in our remittance-as-a-service platform.
TB: Could you give us some use cases or illustrate ways in which businesses can leverage Nium’s remittance-as-a-service capabilities?
YS: That’s a really good question because I think as I mentioned, there are multiple partners who could use our remittance-as-a-service solution.
Let’s say you’re a bank in the Philippines, a country where ten percent of the GDP comes from remittances and banks play a key role in it. There are also mom and pop shops or what are popularly known as microfinance outlets or pawn shops which cater to this. Now all of these are large brands. These brands are available and very well known to Filipinos across the world. While these brands cater to the Filipinos, they only cater to one leg of the transaction. But with remittance-as-a-service, they can launch their services in all the markets that Nium has licenses in and they can send money in almost a closed loop fashion to control the journey on both ends.
The same thing holds for banks. If you have customers abroad who are using various other means to send money back, why not keep it within your ecosystem so that you ensure that you serve the customer end to end. It also ensures that that customers get to see your offerings and don’t shop around for other choices. You can combine the journey and make it valuable for the customer.
The second example is if you are a consumer brand and you already are doing domestic payments, or you are a wallet who’s got a set of customers. We have a very interesting use case in India. They are one of largest financial wallets in the world and one of the top downloads on the Google Play Store. They use our remittance-as-a-service platform to send money out of India. That’s not a capability they have and nor do they have the requisite license for it. We bring in the infrastructure, technology and our expertise. We also have a strong compliance platform which is part of our offering.
You get to use not only our technology, but also our compliance to be able to offer remittances when you don’t have the ability, either from a regulatory perspective or an understanding or knowledge perspective.
The third use case is a very important one, as a lot of technology companies need payments to be made to their partners. For example, we are talking to a large app which is used for entertainment across the world, where people make videos and then these influencers have to be paid. To pay them out, I think the organisation needs some control and that control could be offered by a remittance-as-a-service solution. It could also give that ability to their customers to move more money across markets. So, all these use cases are there for partners to utilise.
TB: Which are the markets that Nium can give its clients access to?
YS: We can give access to all the markets where we are licensed to send. Right now we are launching with a pilot in Singapore and Australia. In the next month or so, we would be available in 35 markets across the world, including all of Europe, UK, US, Canada and quite a few key markets in Asia, like India, Singapore, Malaysia, Hong Kong and Australia. We also have licenses now in Indonesia and in Japan. All these countries will be available, but we’ll start with Singapore and Australia before moving to other markets.
All of this is available to the customers who choose RaaS. The integration is a one-time integration and you get all the countries as they come on board. You don’t have to integrate for every single country. In each country, Nium takes care of the regulatory requirements and the infrastructure that you need to receive payments or to send out payments.
All the fraud control measures and the compliance is included in a single package so that you can just plug and play and go live in these countries as soon as they are available on the Nium platform for RaaS.
TB: Yogesh, what would you say is the edge that Nium’s RaaS offering provides that doesn’t exist in the market today?
YS: Having spent so many years in the payment industry and so many years in the remittance industry, I can tell you that there aren’t too many players who are offering this as a holistic package. There are players that can offer you bits and pieces, but Nium is offering this as a package, which includes the ability to send using a licensed entity in that market, to be able to customise your front end and to be able to go live in a few weeks to a month, and use fraud management, compliance and all the payments sources.
This is a big leg up for anybody who wants to get into the remittance industry. Most of this is almost proprietary for remittance players. The belief that Nium has is that we are here to provide infrastructure so that people can service their customers better. I think we’ve taken a different path and therefore we are offering this as an overall package to the customer. I think in that way, we are almost unique in the market and we will have an early-mover advantage when we do RaaS.
TB: My last question circles back to where we started. How do you see fintechs, like Nium, disrupting the remittance industry in the years to come?
YS: This is very interesting. My last role was in a very traditional remittance outfit which was one of the top two outfits in the remittance space. As a regional leader there, I thought about this every day and it is something that I really feel is very dear to my heart.
This is one of the reasons I joined Nium and I’m a part of this journey. I think what the remittance industry is going through right now is that there was a phase when fintechs came and they had a lot of ideas and ways to implement those ideas because of generous funding. They could really go and disrupt the market on price.
But now that that phase has passed and we are in a in a phase where the monetary flow is a bit tighter, I think we are finding out that fintech companies are looking at something more than just price. It is about the experience, the efficiency and the loyalty that you would get by using us. Something that makes your next experience simpler and easier.
As a fintech, our function is to get out of the way. As a payments brand, we should get out of the way so a customer can do what they want to do. If they are focused on sending money, it should be so seamless that they should not notice us. For a brand like Nium, we are doing exactly that. We are letting the customer control and drive their journey, which puts us in a unique position.
The other piece is that a lot of players in the remittance industry are what they call a ‘one-trick pony’. Everybody does the single remittance thing. That is why we are trying to build more than that because for us, the remittance is a part of an overall journey. It is about what the customer needs apart from remittances.
A remittance customer typically wants to send once a month, and if it’s a Filipino or Mexican customer, probably twice a month. With what we are building and the level of engagement that we are building, we can expand that and introduce more products. As we move and transform ourselves into a fintech that can offer not only remittances but more products, I think that’s going to be key for the industry.
There will be a lot of disruption, but there will also be players who will offer apps, which will give you much more than just remittances. People therefore will move away from traditional players and go to players who they use more often. It’s not that app that they open once a month and then forget about, but they will use it much more often. So that frequency will increase and that’s what we are building. I think that’s going to be the big disruption in the next few years to come.
TB: Thank you so much, Yogesh. It’s been such a pleasure and you’ve given us a lot to think about.
YS: Thanks, Taneia. Always a pleasure.