Weekly Press Release

Another busy week for all. This week has been dominated by the G20 meeting and it is to be hoped that the actions that were agreed will improve the global environment, not hinder migration and ensure the best environment possible for remittances. This week’s news round-up includes further items on the economic environment, new business partnerships and new technologies. It also includes an article on a new price comparison website for the unique market area of Australia, New Zealand and the South Pacific.

Judging by the number of conferences that there are around the theme of remittances at the current time interest in this subject is gathering all of the time. Just a reminder to begin thinking about the MTD conference – the first to be held in Eastern Europe and the CIS. We continue to try and bring you new news angles and be at the forefront of thinking on any aspect of remittances. Don’t hesitate to contact the team for help in any area.

Until next week.

Leon
Leon Isaacs – Managing Director

1. Remittances to be increased to $15 billion’

KARACHI: Federal Minister for Overseas Pakistanis, Dr Farooq Sattar said on Monday that incentives would be offered to overseas Pakistanis for increasing remittances from $7 billion to $15 billion.

Dr Farooq Sattar said that $15 billion remittances target has been set for the fiscal year 2009-10, as compared to $ 7.5 billion in the year 2008-09. “Despite, unfavorable environment and tough competition we are hopeful to achieve this target.”

Minister said that “a meeting with governor State Bank of Pakistan, Syed Saleem Raza will be held next month, in which a mechanism will be composed to achieve this increased remittance target.” He said Overseas Pakistanis investors would be attracted through incentives to invest in housing and textile sectors in the big cities like Karachi and Lahore. The availability of ideal atmosphere is necessary for the foreign investment. District governments can play a vital role to create opportunities of investment in the housing sector.

LI: We have been following these developments with interest as it is hoped that other countries may learn from incentive schemes that are designed to encourage remittances through formal channels.

2. Remittances to Latin America Falling

WASHINGTON – The sending of remittances to Latin America this year will fall for the first time since the Inter-American Development Bank began measuring the money flows in 2000, the IDB said on Monday.

The IDB reported on Monday that remittances to the region reached $69.2 billion in 2008, an increase of less than 1 percent from 2007.

In the fourth quarter of last year, remittances fell 2 percent compared with the same period in 2007 and the bank says that the trend accelerated in January 2009, adding that a reduction in remittances of between 11 and 13 percent is expected for the full year.

The expected decline in 2009 comes after years of double-digit increases in remittances, the IDB said Monday, emphasizing that for some countries in the region, monies sent home from abroad amount to as much as 12 percent of gross domestic product.

The IDB said in its last report on remittance flows that it is probable that foreign direct investment and income from exports and tourism will continue to come under pressure during 2009, thereby increasing the importance of remittances.

It also mentioned that exchange rates are playing a much more significant role in the determination of the effect of remittances on the receiving nations.

LI: This report from the much respected IDB clearly tells it how it is. Of interest though is that this is not a depressing report as it emphasises that despite the decline in total volume that remittances may become even more important in the next year or so.

3. Remittances to Bolivia Outpace Investment by 2-1

LA PAZ – Bolivia received nearly $1.1 billion in remittances last year, more than twice the $507 in foreign direct investment going to the Andean nation, an economist with the Inter-American Development Bank said on Monday.

The IDB’s Omar Zambrano said that money sent home by emigrants now represents between 5 percent and 9 percent of Bolivia’s gross domestic product.

He told ATB television that according to IDB forecasts, Bolivia will see a drop in remittances in 2009, the first such decline this decade, due to recession in the United States and Europe.

Nearly half of Bolivian remittances come from Spain and other European countries, Zambrano said, while the rest originate in the United States, Argentina, Brazil and Chile.

He said that Bolivia is less vulnerable to the fall in remittances than countries such as El Salvador, where money sent home by expats amounts to 12 percent of more of GDP.

Zambrano said the decline in remittances will hurt the roughly 60 percent of Bolivia’s 10 million people who are living below the poverty line. EFE

LI: This story again emphasises the dependence of remittances to Bolivia but also that the largest send market to Bolivia is Spain and not the US – which seemed a bit counter-intuitive.

4. Remittances to Jamaica fell 18.3 per cent in Feb

Remittance inflows fell by US$30 million ($2.66 billion), or 18.3 per cent during the month of February 2009 when compared to the corresponding month last year. Inflows totalled US$133 million ($11.79 billion) during the review month.

The 18.3 per cent decline in February followed a 10 per cent decline during the previous month placing the total decline for 2009 thus far at 14.2 per cent, or US$44 million ($3.92 billion).

The drop in February also represented the fifth consecutive month of decline and the largest decline since August last year when a 0.4 per cent downtick was registered.

According to the Bank of Jamaica's (BOJ's) remittance update report for the month, other economies in the region have been reporting declines since last year, but Jamaica was among the hardest hit by falling inflows.

LI: A couple of months ago we brought a story that said that Jamaica remittances were holding up well. It looks like that might have been a little optimistic and that the latest data shows that it is a difficult market. All indications show us that roughly the same number of transactions are being made but the average value is less. As good volumes come from the UK the weaker pound is not helping.

5. India received USD 45-bn remittances in 2008: World Bank

Washington, Mar 25 (PTI) India received remittances to the tune of USD 45 billion in 2008, making it the top recipient ahead of neighbouring China, according to a World Bank report.

However, remittances would decline by five to eight per cent this year to USD 290 billion, World Bank's 'Migration and Development Brief' said.

India received USD 45 billion in remittances last year followed by China, which got USD 34 billion, the bank said in a statement.

LI: This was in the World Bank report that we had a press release about last week. It is believed that even the $45 billion figure may be an underestimate.

6. S&P seen to maintain RP ratings

MANILA, Philippines - Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. expressed optimism that Standard & Poors would see the country’s resilience against the tide of global economic downturn when the credit ratings agency conducts its ratings review this week.

S&P has held the country’ ‘BB-/B’ foreign currency and ‘BB+/B’ local currency ratings with a stable outlook which meant that the Philippines is not at risk of downgrade, at least for the time being.

In its most recent review, S&P said the country’s credit ratings outlook could turn from “stable” to “positive” if the government could lay a convincing groundwork for developing a sustainable, expanded revenue base that would provide for continued fiscal consolidation and debt reduction while also allowing for ongoing capital spending.

Remittances are widely expected to drop sharply this year, with the central bank projecting single-digit growth for the first time since the government started tracking these inflows. Foreign banks expect declines of as much as 20 percent.

LI: We have included this here because remittances are such a fundamental part of the Philippines economy that anything that impacts them can have a wider impact in general. I don’t think many people realised that they can affect a country’s sovereign rating but as this shows – they can.

7. E-money reforms pave the way for new competitors in European payments market

The European Commission has approved proposals for a fundamental reform of the rules governing electronic money institutions, paving the way for mobile operators and other 'hybrid' institutions to obtain e-money licenses.

The compromise text for a new Directive has been agreed by the Committee of Permanent Representatives (COREPER) under the aegis of the Czech Presidency. It has been drafted "to remove the high regulatory barriers preventing the development of an electronic money market in the European Union and to set reasonable conditions for the business operations of electronic money institutions", says the Commission.

A fundamental change in the draft Directive is a reduction in the regulatory burden placed on electronic money institutions and the convergence of their status with provisions on payment institutions under the Payment Services Directive. The capital requirements for e-money issuers have also been scaled back, from the current EUR1 million to EUR350,000.

A marked departure from the current legislation is the possibility of "hybrid electronic money institutions", that perform other activities in addition to the issuance of electronic money. This should make it easier for mobile operators to develop their services in a clearly defined regulatory environment, says the Commission.

The European Parliament should officially approve the proposal during its plenary session in the second half of April. The EU Council will formally confirm it in May.

LI: This change is quite important for money transfer companies and particularly thinking of entering the world of E-money. IAMTN was one of a number of bodies that lobbied the EU in this area to ensure that a level playing field was created between the e-money issuers and payment institutions under the PSD.

8. The Bank of Uganda is currently carrying out a second household survey on workers remittances to Uganda.

BOU says that the house survey is aimed at generating information on money and other items in kind received from Ugandans living and working from broad who are popularly known as ‘ Kyeeyo’

BOU’s Communications Director, Juma Walusimbi says that survey information collected will be shared between BOU, national policy makers and planners to improve the environment for sending and receiving money as well as establishing licensed remittance services providers.

Wsalusimbi says that this is a second survey after one was done in 2007 by the Bank of Uganda under foreign exchange Act of 2004 and Uganda Bureau of Statistic’s Act of 1998.

Walusimbi ays that competent field staffs collects information on money received by house holds from relatives living in abroad with in a prescribed period and that the targeted are selected 4,080 house holds located in urban parts of Uganda.

He says that the information will at the same time be used to estimate all the amount received with in that given financial year plus the value of item received

LI: These surveys, when properly carried out, can provide really valuable insight into the market environment and lead to policy changes. The key is to act quickly on robust results.

9. New Australia and New Zealand Website www.sendmoneypacific.org launched

Pacific Islanders working in Australia and sending money home to their families will now be able to compare methods and costs, thanks to a new website launched by Ms Amanda Rishworth MP, Chair of Australian Pacific Parliamentary Friendship Group.

The new website, www.sendmoneypacific.org, is designed help workers find the most effective way of sending money from Australia and New Zealand to Pacific island countries.

The website is cofunded by the Australian and New Zealand Governments and developed in close consultation with Pacific Islander communities in both countries. It is managed by Developing Markets Associates Ltd.

“This is an important tool to help Pacific island workers make informed choices about ways to send money home, and ensure they maximise the value of the remittances they earn while in Australia,” Ms Rishworth said.

Compared to other regions around the world, the cost of sending money home to the Pacific is much higher. The website allows individuals to compare money transfer services in terms of cost, speed and convenience.

“It will improve transparency and promote competition in the money transfer service sector, all of which will help drive down the cost of sending money to the Pacific,” Ms Rishworth said.

“Remittances in some Pacific island countries provide a significant consumption smoothing effect in difficult times, such as those we are experiencing now with the global economic crisis. Initiatives such as this help to maximise the money that gets to those that need it.”

The global average money transfer fee is approximately ten per cent, whilst in the Australia–Pacific Island region the cost is between 13–30 per cent of the amount remitted. These costs include transaction fees, foreign exchange commissions, messaging fees and pick-up charges.

The website provides details and transparent information on the fees and services for key money transfer service providers and the speed to transfer funds. It also uses a “secret shopper” to spot check the validity of information provided on the website.

Information on conducting money transfers to Fiji, Kiribati, Papua New Guinea, Solomon Islands, Samoa, Tonga, Tuvalu and Vanuatu is included on the website.

In addition to the cost comparison service, the website will provide Pacific Islander communities within Australia and New Zealand with a news service, financial information and notice boards. Information from the website will be made available in hard copy for distribution to community groups.

LI: I have a bias here as our consultancy produced the site. It is the most comprehensive site of its type anywhere and follows the principles of remittance comparison website that are being designed by the World Bank. The initial reaction from consumers in both Australia and New Zealand (where it was launched the previous week) has been extremely favourable.

10. Belgacom pilots mobile payments and remittance transfers

Belgacom and m-payments vendor eServGlobal say they have successfully tested their new mobile phone-based international money transfer service.

The HomeSend service - a global hubbing service for international remittance, airtime exchange and roaming recharge - was used to send remittances by phone from Belgium to a North African country.

The test comes shortly after the partners were selected by the GSMA, which represents the interests of the worldwide mobile communications industry, as a remittance provider for its mobile money transfer programme.

LI: Following hot on the heels of their selection as a GSMA remittance provider this shows that Belgacom are moving at pace in this area.

11. Nokia invests in Obopay

California-based m-payments outfit Obopay has received a major investment from mobile phone giant Nokia, which it will use to move into new markets.

The firm launched its mobile payments service in the US in 2006. Subscribers to the service can check their account balances, collect money owed from other mobile users, view transaction histories and invite friends to use the service.

It has since sought to enter other, developing, markets, moving into India last year and teaming with microfinance pioneer Grameen to launch an initiative that aims to use mobile technology to deliver banking services to a billion of the world's poorest people by 2018.

LI: We watch the activities of Obopay with interest as they have been extremely adept at forming partnerships and attracting investment from significant businesses around the world. This is no exception.

12. Nexxo Financial Transforms Traditional Remittance Company With Innovative Self-Serve Technology

Los Angeles branches allow consumers the ease of sending money abroad via automated Nexxo Cajeros

SAN BRUNO, Calif., March 24 /PRNewswire/ -- Nexxo Financial Corporation announces the completed transformation of Aval Envios, a money transfer company in Los Angeles, to a self-serve model with installation of its technology and Nexxo Cajeros inside the branches.

A recent acquisition, this addition supplements Nexxo Financial's footprint of Cajeros, which are ATM-like machines that offer consumers an easy, convenient and affordable way to send money to Mexico, Central and South America. The company operates more than 100 Nexxo Cajeros throughout California, found in banking institutions, grocery chains, convenience stores, independent markets, pharmacies, and community centers in Hispanic communities.

With the new model, Aval tellers oversee the customer experience using Nexxo Cajeros instead of handling transactions and there is extended operating hours including access on weekends as well as during the week. Nexxo Financial also offers clients several benefits including receiving confirmation of a money transfer transaction via text message on cell phones and the convenience of conducting transactions at several nearby locations where Nexxo Cajeros are deployed. Consumers can send funds to an expansive network of more than 21,000 bank branches and pick-up centers throughout Mexico, Central and South America.

LI: We have brought you significant updates on this story before. Clearly Nexxo continues to expand and the use of automation to reduce teller interaction will bring clear benefits for the locations where these are implemented.

13. Western Union Signs U.S. Bank, Sixth Largest Commercial Bank

The Western Union Company (NYSE: WU) and U.S. Bank, the sixth largest commercial bank in the United States and lead bank of U.S. Bancorp (NYSE: USB), announced an agreement to offer the Western Union® global money-transfer service in 2,791 U.S. Bank branch offices across 24 states. The agreement will connect consumers to more than 334,000 Western Union Agent locations worldwide.

The signing of U.S. Bank is an important step in Western Union's North America "go-to-market" strategy by entering into new classes of trade. As Western Union expands its service offerings, in an effort to strongly position money transfers to consumers, it is tapping into consumer banking channels including: Cash-to-Cash, Account-to-Cash, and Account-to-Account.

The Western Union® global money-transfer service will be available at U.S. Bank locations as soon as May 2009. U.S. Bank walk-in consumers will be able to send domestic or international money transfers for payout in 200 countries and territories. Plans also include expanding Western Union's services to U.S. Bank online consumers.

LI: This article shows that win-win partnerships can be created with banks. It is interesting that the bank is looking to develop an account to cash proposition whilst WU continues to expand its footprint in new business areas. It will be interesting to see if other banks and MTOs follow suit – particularly in Europe.

14. Ararat Bank launches transfers by Money Gram system

Ararat Bank, the first Armenian bank which introduced XPRESS Money international transfer system in the republic two months ago, has launched Money Gram transfers, the bank’s press office reported.

Implementing international remittance systems in Armenia, Ararat Bank offers its clients an opportunity to choose the most competitive tariffs and the most convenient means of money order.

Ararat Bank has already established a special-purpose Money Gram branch in Yerevan.

LI: This development comes in an area where banks are not allowed to enter exclusive contracts with operators. This will help boost MoneyGram’s presence in that country.

15. TeleMoney to open 20 more centers

RIYADH, TeleMoney, a remittance wing of Arab National Bank (ANB) Saudi Arabia, plans to open about 20 model TeleMoney Centers within the next two years in a renewed effort to maximize its reach among customers and to add new services to its portfolio. "Plans are also afoot to modernize the existing TeleMoney Centers and introduce new electronic remittance services," said Mousa Al-Askar, head of ANB's retail centers. Al-Askar said, "The new TeleMoney centers, including the existing TeleMoney outlets currently undergoing modernization, would help expatriate workers to remit their funds faster and without any hassle." He said that ANB would offer phone remittance services shortly, and this will be the first to be offered in the Kingdom. "This unique service from ANB will allow a customer to remit funds from the convenience of his/her office or home through telephone instructions at any given time," he added.

LI: In a bank dominated environment it is interesting to see that a bank is trying to behave more like an MTO in its distribution strategy.