It makes the world go round

New money exchange concepts are cropping up for low-income workers as companies cash in on the nation's growing remittance industry.

Grace Rosalin says she sends money home to the Philippines at an exchange house in Mall of the Emirates. Razan Alzayani / The National

Grace Rosalin works as a housemaid in Dubai’s Arabian Ranches. A native of the Pangasinan province in the Philippines – a five-hour bus journey north of Manila – she contributes, monthly, to the growing industry of global remittances that topped US$530 billion in 2012, according to the latest World Bank figures.

The UAE, with its large expat population, is also fast becoming a world-class conduit for international cash transfers.

“In terms of remittances the UAE is the third-largest country in HSBC Group behind Hong Kong and the UK, where it is our biggest business,” says Gifford Nakajima, HSBC’s regional head of wealth development. “Remittances are a core part of our banking operations. We have a diverse customer base here with varying degrees of remittance needs which we can only see growing.”

For Ms Rosalin, who has worked in the UAE for six years, sending her salary home to her family in her village is a monthly ritual.

“I use Al Ansari Exchange in the Mall of Emirates because it is easy to use. There are many of them about and I trust them because of this,” says Ms Rosalin, 40, who pays for a door-to-door telex transfer costing her Dh15. “I did use a bank but it cost me Dh25 and then there was a charge of 100 pesos (Dh8) in the Philippines. My sister would have to travel to the bank, so there was no benefit; the exchange delivers it to her door.”

Remittances across international borders has become a huge business in the past decade. India and China were the biggest beneficiaries of remittances last year, each receiving more than $60bn, followed by the Philippines at $24bn. In Egypt, the sixth largest, the value of remittances has surged from less than $9bn in 2008 to nearly $18bn last year.

While Ms Rosalin is happy with the service she receives, the boom in remittances has led companies to target the UAE as a base for international cash transfers, with new concepts opening up to expats.

Among them is TransCash Corporation, an international currency transfer franchise, which recently launched a prepaid card that negates the need for bank accounts and money transfer agents by using plastic.

“It’s about moving money from one country to another at low prices, basically free, with total convenience,” says Charles Cohen, chairman and founder of TransCash. “We are targeting the immigrant workers who have difficulty transferring money, the unbanked, the people that need to get their money to another country quickly, cheaply and seamlessly without resorting to a banking institution.”

The franchise has set up a handful of branches in Oud Metha, Deira and Al Rigga. The system involves two cards being issued to a customer; one is a loadable card and the other given by the cardholder to whomever they wish to receive the funds.

Once money has been loaded on to the first card it is immediately available for use by the holder of the second card wherever in the world that person is. The cards cost Dh45 to purchase and Dh15 per month service fee.

While the service may seem a competitor to banking operators, the card issuer in the UAE for the TransCash product, Abu Dhabi’s Finance House, says it is simply another vehicle for customers to send money home and a “win win” for the bank.

“There is also a corporate card that can have the salaries of staff loaded onto them. This needs wage protection services (WPS) and other banking services, such as overdrafts, extended to the clients of TransCash,” says Mohammed Wassim Khayata, the group chief operating officer at Finance House.

So how do remittance services make money? While the transfer fees involved seem low – charges average about Dh20 for every Dh1,000, depending on the money’s destination – the margins are made on foreign exchange.

“Profits come from the thousands of people that pay Dh20 a transaction, but the margin is made on the foreign exchange. That is where the real money is made,” says Rebecca Hooton, director of Global Currency Exchange Network, a UK-based money exchange that focuses on customers with larger capital amounts to move. Its biggest traffic is from the UAE to the UK followed by Australia, then mainland Europe.

“We don’t charge people a fee; we don’t charge a transfer fee or a maintenance fee, we don’t need to because we make money off the foreign exchange,” says Ms Hooton. “We have very low overhead costs with no retail unit to service, so our costs are lower and therefore we can afford to offer the most competitive rate in the market.”

Another new remittance service to crop up in recent months is Instant Cash, an international electronic money transfer service.

Appealing to the non-card carrying portion of the Gulf’s guest workers, the venture comes from Wall Street Exchange, part of Emirates Post Group, which signed an agreement with India Post, the world’s largest postal network serving more than 1.2 billion people, in October.

Non-resident Indians (NRIs) can remit money instantly with recipients able to receive their payment at any of the identified 17,500 Indian post offices, making it easier for those living in rural areas to access the cash.

“Globally, India is the largest recipient of remittances, half of which come from the Gulf,” says Sultan bin Karsham, the managing director of Wall Street Exchange. “We are making significant investment in building our ‘Instant Cash’ money transfer service and our agreement with India Post is a major move in this direction.”

As for Ms Rosalin, she does not plan on switching her method of sending money to her sister any time soon.

“The TransCash card would not help my life because my village does not have shops that accept cards generally and the ATMs are only in the city,” she says. “I like the system I use now as the money arrives at my home and I know it is there and able to be used immediately. And everybody accepts cash.”