Productizing Remittances
Friday, April 4, 2008
Can remittances be more than simply cash-to-cash funds transfers? Indeed, the ?productizing of remittances? is an approach that looks at the value chain of money ?ows to identify situations where the desired ?nal output is not cash but the acquisition of tangible products or services. It is a product development and delivery process in which remittances are directly turned into the value for which the money is intended.
The bene?t of this approach is its greater economic impact compared with traditional cash remittances. The cost of the money-transfer element of the transaction to the sender is virtually eliminated, thus increasing the buying power of the remittance. Furthermore, the sender maintains more control over the use of the remittance, thus lowering waste and misuse of the money. The productized remittance approach can also give senders more options for managing their money, including ?nancial services such as bank-based savings accounts, loan-based purchases, and access to capital.
By Bal Joshi
Can remittances be more than simply cash-to-cash funds transfers? Indeed, the ?productizing of remittances? is an approach that looks at the value chain of money ?ows to identify situations where the desired ?nal output is not cash but the acquisition of tangible products or services. It is a product development and delivery process in which remittances are directly turned into the value for which the money is intended.
The bene?t of this approach is its greater economic impact compared with traditional cash remittances. The cost of the money-transfer element of the transaction to the sender is virtually eliminated, thus increasing the buying power of the remittance. Furthermore, the sender maintains more control over the use of the remittance, thus lowering waste and misuse of the money. The productized remittance approach can also give senders more options for managing their money, including ?nancial services such as bank-based savings accounts, loan-based purchases, and access to capital.
There are many examples of how intermediary businesses have productized remittances in various parts of the world, particularly Asia and Latin America. Thamel.com, a part of Thamel International, caters to more than 2 million Nepalese diaspora around the world. Through its platform, members the Nepali diaspora can purchase products and services in Nepal for themselves or for their friends and families, and also be eligible for loans? ?nanced by Kumari Bank Ltd in Nepal?for housing, small businesses, education, or investments. For example, a Nepalese migrant working in Qatar can qualify for a loan to purchase a vehicle for a spouse residing in Nepal.
By making the payment for the vehicle through Thamel.com, the spouse can afterward drive and operate the vehicle as a taxi in the streets of Katmandu. In addition, there is no money transfer fee associated with loan payments.
Aryty (www.aryty.com), a telecommunication company based in the United States, serves the Filipino diaspora. Through its website, the diaspora can remit pre-paid airtime to friends and relatives back in the Philippines. Aryty users are not sending money; they are simply sending pre-paid airtime to the recipient?s phone. Similarly, multinational cement giant CEMEX enables Mexican immigrant workers to send building materials instead of cash to their families back home.
Another company serving the Mexican diaspora is In?nity Systems International (ISI), which provides Mexican immigrants with an alternative means of transferring hard-earned funds to family members in Mexico for basic needs such as food, clothing, household items, medical care, pharmaceuticals, infant care items, and housing. ISI?s Tarjeta M?s? Program allows immigrants to send money in the form of a stored-value gift card to family members or friends, thus cutting out the remittance middleman and directing the funds to speci?c areas of need.
Productizing remittances provides a real development opportunity by moving beyond the transaction itself to addressing how these transfers are managed. Therefore, intermediary businesses operating the remittance-based platform, such as those discussed above, are motivated to ?nd new ways to add value and offer new products and services to the remittance sender. Understanding remittance senders? needs and developing the relationship between remittances and potential local business development are critical if remittances are to provide optimal economic results for the remittance sender and receiver, their community, and their country.
