The Case For Small Value Remittances

Many startups and incumbent players want to tackle multiple corridors when it comes to remittances. Some of them are doing this successfully. However, some very ‘basic’ problems are still yet unsolved. One such problem is the ability to do small value transfers across the border, in real-time and for a very low fee.


Hello. My name is Faisal Khan. I’m a banking and a payment consultant. I want to tell you about something about migrant remittances, especially those in the blue-collar arena.

You know, I’ve been to camps in Dubai and Abu Dhabi and spoken over there and met up with these laborers who are construction crews, etc who send money back home. And I’ve talked to a lot of people who send money back home to their families for family maintenance. And I ask them, what’s the number one thing that they think about? And they always keep saying a couple of things and I want to explain them to you.

It’s just that on the first of the month, I have to send you know, I get paid, I get, let’s say I get paid a thousand dirhams (AED 1,000) or a five thousand dirhams (AED 5,000), I have to send that money back home. It serves me no justice, not even for one day if I get to keep that money extra in my bank for one day, I don’t get any credit for it, I don’t get any facilities for it, I don’t get any leasing or any leeway or any sort of leverage for the money that I earn. So, that’s one thing. They feel really bad about that part.

The second thing is, no matter what, they have to put up a stone on their heart and send that money back home. They spend the entire month working for it, but the money has to go because like I said, it serves them no purpose. So that’s the that’s you know, that that’s pretty heavy for them. The other thing that they really don’t sort of understand and I have a lot of issues with is, you know, in their mind, they have budgeted that money that they’re sending back home. They may have spent, you know, 500 dirhams for rent, 200 dirhams for school tuition, 190 dirhams for, you know, let’s say utilities, 300 dirhams for, let’s say, you know, groceries, etc.

But the fact is, when the money goes back home, it is misappropriated. The rent is paid, but the utilities go way out of budget. The groceries go way out of budget. The school fees is there. So what inadvertently happens is towards the 18th to the 19th to the 20th of the month, the binging starts. Send more money. Send more money. We’re almost out. Send more money. And that is a constant tension to them because they know they can eventually send them money, but they’ll have to wait. And this is why I’m making this video. What’s the problem?

The problem is that they don’t need a whole whole lot of salary to be sent home. They need a little bit of money. So let’s say if they need 50 dirhams more or 110 dirhams more. There’s no way that a person can send 50 dirhams back home to the Philippines or back home to India, Bangladesh or Pakistan in an affordable manner. They have to get out, they have to go, they have to stand in line, fill out forms and then to send 50 dirhams? This doesn’t, this just doesn’t work. And herein lies the problem.

If they could somehow be able to send microtransactions – 50 dirhams, 10 dirhams, 25 dirhams, 150 dirhams, 200 dirhams – they don’t have to think about it. And if they can do so in real-time and with an affordable package, that means it cost them, let’s say, 3 percent off 50 dirhams and not, you know, like something like 25 dirhams just to send 50 dirhams. But if they can spend that money wisely in a cost-effective manner, then this, you know, this pinging that starts from the 18th till the 31st or the 30th of the month, that stress can really, really reduce.

So if you’re designing a payment product or if you’re designing a money transfer remittance product, maybe this is something you may want to look into. How can you have small value transactions? You know, micro remittances go across the border in real time, affordable fashion, and obviously, you know, the amount is small. If you can figure that out, I think you have a very good business case. I mean, fine you want to go into the international remittance market space, but find a problem to tackle. Not, in fact, so, so few people are tackling this problem. I see it as a huge opportunity.

I just wanted to take some time and talk about that. If you have an idea or a suggestion, there is a contact form in the description below. Please fill it out and we’ll be happy to look at it and maybe make a video for you. Till next time, have a good.

This page was last updated on September 1, 2022.

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