A Voracious Appetite: How Ripple Seeks to Ease Feverish Demand for Remittance Payments

There have been a great number of people speaking out about the challenges that come with the process of completing cross border remittances during the Ripple Regionals in Bangkok, Thailand.

Demand in APAC for fast, affordable cross-border remittances is growing, but existing services can’t keep up. Find out how #blockchain is changing that: https://t.co/RsSqyjWo47 pic.twitter.com/ZqXGZX88tq

— Ripple (@Ripple) April 12, 2019

Over the course of the day, one of the final speakers, the Vice President of Disruptive Technology Office as well as the Chief Strategy Officer for Siam Commercial Bank – Paul Arriyavat managed to place a concrete number on just how much it moved through remittances – $68 billion.

Cross border remittance services host such a vast sum of money due to the fact that workers reliably send a good percentage of their incomes to their families. The Senior Managing Director for Group Treasury Sales and Financial Exchange for CIMB – Thomas Kiong – shone a light on the plight of migrant workers using these often out of date and costly services.

He explained that

“Our country hosts of lot of migrant groups, and we’ve always catered to this segment. Malaysia to Indonesia is a very big cash-to-cash corridor and we also have a lot of Filipino workers.”

Cross-Border Pains – The Source Of It All

There is a voracious and rapidly increasing demand for a far faster, secure and cost-effective system for cross-border transfers, payments, and remittances and that will not be changing anytime soon.

What countries in South East Asia are finding is that the remittance services that are ubiquitous and frequently used by customers are failing to provide the services needed. Recently, for example, CIMB has partnered up with the remittance service, Western Union, in order to support and help customers send money overseas more effectively.

While it is something to applaud, the intent just doesn't pair up to the requirements, or as Kiong puts it –

“the economics were very much tilted in their favor. We did 80 percent of the work but only got 20 percent of the reward.”

The end result of these services is that they remain painfully expensive for the end user. This is especially the case for those migrants within lower paid roles internationally. Cross border transfers can often take as long as a week to reach recipients internationally, and when that money is desperately needed for buying food or providing primary care to the elderly and/or vulnerable, these delays can be something far more dangerous than just a nuisance.

In spite of the drawbacks that migrants face in using these services, the woefully low level of penetration from other providers mean that these same users have no viable alternatives. Arrival goes on to note this:

“banking penetration is so low. People use cash. It’s convenient, it’s cheap. As a bank, we cannot reach 70 percent of the population. Even though people in Southeast Asia are very advanced smartphone users, when it’s time to pay, they don’t use their phones.”

From Misery To Opportunity

“This region is full of pain,” Arriyvat goes on to acknowledge, “but also full of opportunities.”

While banking penetration does remain low in this industry, there is a demand that is eagerly awaiting the supply of a cost-effective, Rapidly working system of cross border remittances, all it needs is financial inclusion.

The SCB has proven itself an adopter of alternative and disruptive methods of supporting users. Having in past ended charging fees for services related to its digital banking application, largely due to the increasing popularity of mobile use thanks to phone companies ceasing charges on SIM cards for customers.

With this adaptable approach taken, the next step that is needed to forge a new partnership with service providers in the blockchain world. One that can prove capable of processing a large number of remittances in real-time, regardless of the hour of the day that a user wanted to make the transaction, and at a highly affordable price for those earning a low salary bracket.

“Blockchain technology became our core [platform] for solving this pain point,” explained Arriyvat. “We started with Thai migrant workers living in Japan and helped them send money home through 30,000 ATMs.”

Tuning Into New And Innovative Networks

CIMB has been very forthcoming about the kind of advantages it sought to secure with the opportunity that providing such a service would bring for them. Were they to be one of the first cross border remittance providers to provide this kind of rapid ease of service, it could definitely set itself apart from the rest.

While this is certainly the reality, the CIMB would firstly have to end its existing relationship with Western Union in order to get started.

“We started our own proprietary product called SpendSend to service the Malaysia-Indonesia corridor,”

Kiong went on to argue

“but Western Union barred us from switching it on. We ended that relationship and today SpendSend has a presence in 31 countries because we charge less than $5 USD for an instant payment.”

Along with wrapping up its existing relationship with the Western Union, SpendSend is now setting its sights far higher than what was previously possible with its now ended partnership.

Targeting higher transactions from a larger number of the regions white collar working population. In order to accomplish something like this, it will need to open up a greater number of payment corridors, as a result, CIMB is working to plug itself into existing blockchain networks in order to expand its reach to an international population of prospective users, and cut costs for its service.

“Being a bank-backed entity opens more doors and allows us to get into a lot more relationships with services that would not deal with Western Union or MoneyGram,” added Kiong. “Blockchain technology allows us to solve the remittance problem for more people. The network enables SpendSend to have greater global coverage, while also bringing new flows into our network.”

The Many Possibilities of One Connection

The SCB has also been hard at work to expand its cross border remittances and payments service to go beyond Thailand and has since begun setting up operations in both Cambodia and Vietnam.

Speaking to the audience during the conference, Arriyavat states

“The product is now called SCB One Connect, and the concept is one connection, many possibilities. Connect to SCB and we’ll distribute your funds to any bank account. Without blockchain and the networks we can now plug into, we could not execute this service.”

For both the CIMB and SCB, the market of migrant payments and remittances is a booming market, with a total of $68 billion up for grabs for those sharp enough to make a bigger and better system. In doing so, companies like SpendSend will be able to put an end to exceptionally costly and painfully slow cross border payments services. Instead, working to ease it with the application of blockchain powered solutions, and potentially unlocking far more opportunities for growth in the region of South East Asia.