Formal channels of money transfer play a key role in maintaining smooth migration of people around the world. With the growth in migration over the years, there has been tremendous development of remittance services provided by non-banking financial institutions. Today, migrants have various options to send money to their friends and families back home. From cash transfers to mobile wallets, the remittance industry today, like any other industry, relies on innovation to provide maximum value to its customers.
Unlike many other industries, regulation plays a very significant part when it comes to operations and innovation in the remittance industry. In more ways than one, regulation is the backbone of remittances. Money transfer operators need to align their business to local laws and regulations of the regions that they operate in. Expanding or setting up shop in a new country could be a challenging task due to the country’s specific regulatory requirements.
Let’s look at a few Asian countries to understand how different countries vary in terms of local laws and regulations for setting up and running remittance and e-money operations.
- The Philippines
The Philippines has a rather open regulatory environment, when it comes to remittances. Non-banks can get a wallet license easily. All they must do is register themselves as a company in the business of e-money. They also allow non-banks to perform international remittances through mobile wallets.
Non-banks can offer remittances as well as mobile money services in this country. The minimum paid-up capital for remittance licensing is 2 million ringgits (Approx. USD 500,000)
This country’s regulatory environment is also quite comprehensive and open. Non-banks can easily get into the business of money transfer by registering as a local company. They also allow remittances through mobile wallets.
As per India’s Money Transfer Service Scheme (MTSS), Non-banks in India can offer remittance services. Although non-banks can launch mobile wallets in India, they are not allowed to perform international remittances through mobile without a banking partner.
Only banks can carry out international remittances and mobile money operations. Non-banks can only partner with banks for disbursement of remittances. However, banks can select network agents and no license is required for being an agent for a bank.
Non-banks with a paid-up capital of over AED 50 million (Approx. USD 13.6 million) can apply for a remittance license in the UAE. In a recent development, UAE’s Central Bank has also allowed a non-bank, UAE Exchange, to provide online money transfer services to its customers.
- KSA (Kingdom of Saudi Arabia)
Non-banks can apply for a remittance license in Saudi Arabia with a minimum paid-up capital of SAR 0.5 million (Approx. USD134,000). Only banks can carry out e-money services in the kingdom.
In China, remittance is a bank-driven industry. Non-banks can only act as overseas principals and need to partner with a bank for remittance disbursements. However, non-banks can get a license for e-money for P2P transfers through mobile.
While regulations are key to safeguarding the interest of migrants sending money and those receiving the funds; governments need to be proactive in the wake of recent technological trends that are reshaping the remittance landscape. Regulators need to accommodate this rapid transformation with timely amendments. Money Transfer operators, on the other hand, must not consider regulations as a challenge or roadblock, but a guiding light for their operations. Most importantly, both, MTOs and Regulatory bodies of different countries need to work hand-in-hand to usher in the future of money transfers.