Firms in race to take a bite of industry estimated at US$681b globally
THE race is heating up to capture the next big thing in financial services, dubbed MFS or mobile financial services.
Evidence of this came about when Telenor, the giant Norway-based telephony group, recently forked out what is rumoured to be a figure of anywhere between RM50mil to RM100mil to swallow up a local multi-country international remittance company called Prabhu Money Transfer Sdn Bhd. Prabhu’s business is in facilitating money transfers, mainly for foreign workers in Malaysia to their home countries such as Bangladesh, India, Myanmar and Indonesia.
Note that Telenor owns a 49% stake in DiGi. Com Bhd. “Being a part of Telenor means Digi has the opportunity to leverage on this acquisition to further strengthen its position in the prepaid migrant market – a segment DiGi is historically dominant in, and is currently undergoing intense competition from other players,” Telenor had said after making the Prabhu acqusition.
Telenor isn’t the only telco getting into this space. Axiata Group Bhd through its local mobile unit Celcom Axiata Bhd, has a 20% stake in Merchantrade Asia Sdn Bhd, one of the largest remittance companies in Malaysia.
According to the World Bank, global remittance flows including those to high-income countries, are estimated at US$582bil in 2015, of which US$432bil went to developing countries. The global remittance flow could reach an estimated US$681bil in 2016.
Many are more familiar with the likes of Western Union, which have been offering international money transfers for decades.
But with the rise of smartphone users in the emerging markets, start-ups and telecom operators are riding the wave, which has reduced the costs and barriers to sending cash overseas substantially.
With the growing number of foreign workers in Malaysia, not only telcos are in hot pursuit of local money transfer providers.
Last year, Ria Money Transfer, the third largest global money transfer company and a subsidiary of Nasdaq-listed Euronet Worldwide Inc, acquired IME (M) Sdn Bhd, a leading Malaysia-based money transfer provider. According to the World Bank, IME’s current markets account for about US$115bil in remittances per year.
For Axiata, its investment in Merchantrade was made in 2013 with a goal to expand the group in the overseas foreign worker (OFW) segment. “Merchantrade is one of Malaysia’s largest money services provider with over 20% market share and accounts for around RM4.5bil of remittance sent globally from Malaysia in 2015 alone,” says Axiata group chief strategy officer Dominic Arena (pic) to StarBizWeek.
Merchantrade is en route for listing on the Main mMarket of Bursa Malaysia, planning to raise around RM200mil, sources say.
Arena says that within the MFS space, Axiata is seeking to capture the international remittance market by tapping into the foreign workers sector.
“Axiata currently sits on a significant diaspora base - within our footprint alone we have over 15 million formal and likely up to 50 million total (including unregistered) foreign workers, representing a market opportunity in excess of US$40bil.
“By combining attractive mobile offerings with MFS services, we believe that we can seize a slice of this pie,” he says.
In Malaysia alone, he estimates the current market size (based on outgoing remittance) to be approximately US$5bil.
“In our footprint alone, our opportunity is around one billion potential users. WWe believe that the key growth driver within MFS is international remittance/P2P transfers followed by payments, insurance and savings/credit products”
Arena says the other segments that Axiata is focusing in the MFS space are mobile payments and mobile insurance due to the market maturity, education and regulatory barriers. Axiata currently offers Mobile Money services in 5 countries – Malaysia (Celcom AirCash & Doowit), Indonesia (XL Tunai), Bangladesh (bKash), Cambodia (SmartLuy) & Sri Lanka (EzCash).
Mobile payments may not be so popular in Malaysia as the country has second highest levels of bank account ownership for adults among South-East Asian countries after Singapore. But foreign workers in Malaysia and the rest of developing countries in Asia have limited access to traditional bank accounts, people would turn into mobile payments services. Arena says that up to 75% of adults in Axiata’s operating countries are unbanked or underbanked, and yet mobile penetration in these countries exceeds 60%, making those markets ripe for MFS.
“In Asia Pacific, there is a clear and significant market growth opportunity for MFS.
“We believe that mobile operators are the logical provider for mobile money/payment because the tool is already in the hands of the population,” he says. He estimates that MFS transactions including remittances, merchandise purchases, bill payments and airtime top-ups in Asia Pacific in total will surpass US$320bil with around 200 million mn users by 2020.
Meanwhile, for Telenor, its goal is to reach 100 million MFS users globally by 2020, and with the acquisition of Prabu, the group believes that it would enhance its MFS footprint in Asia.
“Through Prabhu, Telenor plans to deliver financial services efficiently, securely and at a lower cost to our 12.3 million customers in Malaysia,” Telenor said after announcing its Prabhu deal.
Among DiGi’s financial services products are DiGi SendMoney, DiGi Simple Prepaid Card, and DiGi Insurance. Digi said it is currently piloting a mobile micro-insurance service, targeting migrant workers in Malaysia.
For Maxis Bhd, it is seeking to simplify money transactions via the mobile phone.
Through its service called Maxis Pay, customers would need to pre-register a credit or debit card and just click to make payments using username and password. This way, they get to bypass the need to repeatedly key in credit card details with every payment.