Why Value-Added Payments In Remittances Reduces Financial Misappropriation?

One of the biggest problems with money sent back home, is the misappropriation of the money that is being received. How can a person sending money back home, control money from being misused? How do you reduce theft of money when paying bills back home? How can you discipline your family to ensure they pay, for what the money is intended for? This short video explains how to solve this problem.

For reference, also see this video: “What Does The Value Added Payment Stack in Remittances Look Like?


Hello, my name is Faisal Khan. I’m a banking and a payment consultant and today I want to talk to you about what it or some of the factors that people take into consideration when they’re sending money.

From field research, what I have talked to people about is one of the most things that they’re interested about is how to avoid financial mismanagement. Let’s say a person is working in UAE and they’re sending money to India or Bangladesh or Pakistan or Philippines and sending a thousand dirhams back home. Now in their mind they figured it out, and they figured it out that they want to send things like maybe 400 for groceries, two hundred and ten for rent, 60 for utility bills, 80 for medical expenses, 35 for school fees etc. That’s what they have thought. And they send the thousand dirhams back home. What happens is, the opposite happens.

The rent will go. The utility bill that was for, which he had…he or she had budgeted 60 dirhams, is actually 180 dirhams, the school fees was not paid, the groceries was supposed to be done in 400, they ended up being in five hundred and eighty:complete mismanagement. Of all the people that I have talked to personally in the field, who spend money… send money back home saying spending patterns back home never really are in, in sync with how I had envisioned that the money would be used. And this is a huge problem for them and the only way they can sort of deflate the problem and in the previous video, it’s in the description below of the vertical stack of payments, one of the ways to avoid this problem is for the sender to be able to pay the bills from their originating country.

For example, if I can pay my rent where my family lives in Manila then they can’t misuse that money right. If I can pay the grocery bill, if I can pay the utility bill, if I could pay the mobile bill, the school fees, the insurance, the gasoline if I can pay all these bills whilst in UAE, then whatever is left is the money that my family can’t, so-called, misappropriate. Everything else has been paid for, the family maintenance has been done. The mis appropriation amount gets smaller, when it gets smaller there is less chances of abuse. Abuse will happen or misappropriation will happen but the amount being affected is a much smaller number. So this is why you need to study the behavior and the psychology of the person sending the money and the behavior and the psychology of the people receiving the money. How will they spend, how will they receive, what is the perception and what is the reality and by understanding these factors, these nuances you can build better products. You can have affiliations with the grocery store who gets 40 percent cashback, you can have an affiliation with a utility store 5 percent cashback, you can have an affiliation with the utility company who have a percent and a half in rebates and so forth.

All of this can increase and up the values offering that you have in the remittance where margins are getting tighter and tighter. So going into value-added payments in the remittance stack is extremely important. I hope I was able to give you some insight on that. If you have any questions or comments feel free to ask in the section below and I’ll be happy to look at it. Till next time, have a good one.

This page was last updated on September 1, 2022.

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