This post was written by Johanna Stemberger, Director at Telenor Financial Services and GSMA’s Lara Gidvani.
The use of mobile money for international money transfers (IMT) is decreasing price and increasing convenience for customers globally, making a significant contribution to the UN’s Sustainable Development Goal 10c, which sets clear objectives for reducing migrant remittance costs. In Asia, progress on mobile money-enabled IMT has been limited due to various regulatory challenges, but some providers are remain drawn to the large commercial opportunity.
Telenor is focused on delivering the benefits of mobile money-enabled IMT in Malaysia with its new service, ‘Valyou’, which launched in November 2016. Malaysia is home to approximately five million migrants who send regular remittances home to their dependents in countries across the region, including Pakistan and Bangladesh. In Malaysia, where over 80 percent of adults have an account at a financial institution, there is a compelling reason to instead target this large, underserved niche market for IMT instead.
The Valyou money proposition stands apart for three reasons:
- Valyou is one of the first services in Asia to offer an IMT solution which allows for transactions from one mobile money account to another mobile money account;
- Valyou is leveraging IMT as an ‘anchor’ use case for the mobile money account; and
- Telenor has shown its commitment to investing in acquiring a remittance company to drive the mobile money and IMT business.
One of the first mobile money account-to-account IMT services in Asia
Valyou is promoting the use of their account-based IMT service as one of the first remittance service in Asia where funds can originate and terminate in a mobile money account. Malaysia-Pakistan is Valyou’s first mobile money-enabled remittance corridor, others such as Bangladesh, Indonesia and the Philippines will follow soon. Besides account-to-account IMT, Valyou’s customers can choose conventional pay out methods, such as direct bank account crediting, cash-pickup, home delivery or pay out via another Money Transfer Organization.
At home in Malaysia, Telenor has taken advantage of high smartphone adoption of over 65% to grow the self-service app for IMT. The IMT service is also offered over the counter, but the ability to transact anytime and from anywhere using the smartphone app is an opportunity for Valyou to compete with the traditional players, by offering greater convenience to users.
Valyou is making significant investments in consumer education to ensure that remittance customers in Malaysia migrate to the smartphone channel from existing OTC remittance channels. Feedback from training sessions will be used to further improve user experience to support users with little experience using digital financial services. At the same time, Valyou is building trust by keeping senders informed at key steps in the transaction journey—for example, by sending a confirmation when the money is available at its destination.
On the other side, over 16 million recipients in Pakistan can benefit from receiving their funds instantly and directly into a Telenor Easypaisa account or other mobile money account. This is possible due to interoperability between the players in Pakistan and illustrates how providers are collectively creating more value for their customers and improving the utility of the service for all customers in the recipient market. Furthermore, recipients benefit from a strong existing network of mobile money agents in remote areas across the country. Valyou is also directly linked to the bank switches in other receiving countries, enabling recipients to access funds conveniently using banking infrastructure.
IMT as an anchor use case
With Valyou, Telenor is taking a pioneering step and looking to international remittances as the primary use case to anchor their mobile money service offering, by catering to the needs of migrant workers in Malaysia. This group is often underbanked and has a pressing need to send money to their families abroad in timely and cost effective manner. Research suggests that migrants in Malaysia send 40-50% of their income to their families at home and the total formal outgoing remittance volume exceeds 34 billion Malaysian ringgit. Valyou is unique because domestic person-to-person transfers and airtime top-ups tend to be the dominant use case and value proposition for mobile money users globally.
Breaking into the IMT space is no easy task. Valyou is up against a strong incumbent service—the traditional ‘hawala’ system. The hawala service has been around for decades and offers convenient doorstep services. However, Valyou’s digital channel for IMT brings significant benefits for consumers and the economy: The formal service allows for the traceability and security of funds, backed by a regulated provider. Furthermore, Valyou offers an account-based service which provides great benefits to recipients in countries with low levels of financial inclusion, by encouraging money management, the opportunity for broader financial inclusion through future products such as credit, and the ability to transact digitally for a range of new transactions, such as merchant payments.
Investing in financial institutions to get in the game
To execute its vision, Telenor took a bold step and acquired a money services business, Prabhu Money Transfer Sdn Bhd, in 2016 and re-branded it Valyou. This acquisition allowed Telenor to quickly secure a remittance license in Malaysia, a known barrier to entry for new players in IMT globally. Telenor can also provide international remittances to multiple countries, leveraging Prabhu’s existing distribution channel.
The road ahead
While it is still early days for Valyou, anticipation is high. By the end of 2017, Valyou plans to have 800-1,000 agents across the country to offer cash-in services to migrants. The account-based service opens the door to adjacent product offerings that leverage customer transaction flow data. For example, Telenor has its eye on assessing credit worthiness for senders and receivers based on the remittance flows using a predictive credit scoring model.
At present, Valyou is focused on rolling out its core offering and encouraging customers to transact using their smartphone app through consumer education and other tools. The central bank, Bank Negara Malaysia, has shown a common interest in formalizing remittances and digitizing cash and has been a progressive and important partner in turning the vision for Valyou into reality. Continued dialogue will be important as this unique service takes off.
 It is worth noting that the first international partnership between two mobile money providers took place in 2009 between Celcom’s Aircash in Malaysia and GCash in the Philippines. Furthermore, there are at least a couple of services in Asia which have a mobile account on one side: Ooredoo’s service between the Middle East and Indonesia and Singtel – Globe which is between Singapore and the Philippines.
Image courtesy of Telenor