Digital money transfers surge as outlook for UAE's remittance sector improves

The digitalisation of the UAE’s remittance sector continued to surge this year as consumers increasingly relied on the convenience of mobile apps to send money home amid the Covid-19 pandemic, according to Rashed Al Ansari, the chief executive of Al Ansari Exchange.

The exchange house registered a 212 per cent increase in its digital money transfer transactions from January to December last year after introducing a mobile app before the outbreak of the pandemic, Mr Al Ansari said.

He did not disclose how much money was transferred using its app, or the company’s revenue from this, but said Al Ansari Exchange had 26 per cent of market share for total remittances in the UAE, up from 22 per cent at the beginning of 2020.

"In our case, we had a digital channel before the pandemic and the numbers have jumped significantly," Mr Al Ansari told The National. "Now, it contributes to 14 per cent of all remittances. I remember two years ago, we were less than 2 per cent.

“The public was basically ready and they just needed a kind of push for a reason to adopt digital.”

Outward personal remittances from the UAE dropped by 5 per cent, or Dh8.3bn ($2.26bn), year-on-year in 2020, according to the Central Bank of UAE's annual report. Transfers through exchange houses fell by Dh18.1bn or 13.8 per cent, while outward remittances through banks increased by Dh9.8bn or 28.8 per cent, the report added.

Meanwhile, remittance flows to low- and middle-income countries fell 1.6 per cent to $540bn in 2020 but are set to rise as the global economy recovers, the World Bank said last month.

Despite the impact of Covd-19, the decline in remittance flows in 2020 was smaller than the 4.8 per cent drop recorded during the 2009 global financial crisis, the Washington-based lender said in its migration and development brief.

“As Covid-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” Michal Rutkowski, global director of the social protection and jobs global practice at the World Bank, said in the report. “Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”

The outlook for the UAE's remittance sector is positive for the remainder of the year and 2022, Mr Al Ansari said.

While the World Bank has forecast global remittance flows to increase by 1.5 per cent this year, Al Ansari Exchange is expecting its money transfer flows to increase by 2.6 per cent, Mr Al Ansari said.

The UAE's remittance sector in 2021 and 2022 will be boosted by events such as the upcoming Dubai Expo 2020 and the UAE government's regulatory changes – including the new law that allows full foreign ownership of onshore companies and the offer of citizenship to talented residents, he added.

“We have the Expo coming up and that means quite a lot of tourism that will definitely add value to the economy,” Mr Al Ansari said.

“[But] don’t forget there is also the recently implemented law that foreign investors can own 100 per cent of their companies onshore – this is something unprecedented for the UAE.

“I also think this will attract a lot of FDI [foreign direct investment] and new SMEs to establish here in the UAE. That will also directly impact the recruitment of talent from outside the UAE. So I believe 2.6 per cent growth … is the minimum we are going to see.”

Foreign direct investment to the UAE surged 44 per cent to nearly $20bn (Dh73.45bn) in 2020, the government said in May. The large inflows to the UAE come amid the country's plans to double the size of its economy to reach Dh3 trillion over the coming decade.

“Traditionally, the second half [of the year] is better," Mr Al Ansari said. "We have Eid [Al Adha], we have the Christmas holidays where there is a big pipe in remittances. So those will continue, in addition to all of the initiatives that the government is doing in order to put the wheel of the economy back into motion better than before.

"I think the signs are positive as long as the vaccinations in the UAE continue at this pace and also worldwide. There will be a pent up demand as well. I think 2022 and beyond is going to be a growth period."

Meanwhile, Al Ansari Exchange is continuing to trial blockchain technology in an effort to streamline the money transfer process and reduce fees, the chief executive said.

By utilising a blockchain-powered network, remittance operators can offer users a much faster, cheaper and more transparent service, technology research consultancy Juniper Research said in a 2019 report.

“This is an opportunity for traditional money transfer operators to change the way they operate; reorienting their business models around the benefits blockchain enables,” Juniper Research said.

Using blockchain will "make the journey [of money transfers] more efficient", Mr Al Ansari said.

Al Ansari Exchange carried out its first blockchain transaction early in 2020.

“We're still finding some issues, some rejections with transactions, which we are basically fine tuning. It has a great potential in the future,” Mr Al Ansari said.

“Not all the banks are part of the blockchain technology. It's still limited. Even if you are part of the blockchain, you have to have a bilateral agreement separately with that bank to fulfil the local regulations, so it's not as easy as people think – there are complications."