Transferwise aims to slash cost of sending cash home for Gulf expats

The lion’s share of Gulf outward remittances head to South Asia. (AFP)
Updated 22 October 2019

Transferwise aims to slash cost of sending cash home for Gulf expats

  • Transferwise targeting multi-billion-dollar Middle East money transfer market with a new hub planned for Abu Dhabi
  • The lion’s share of Gulf outward remittances head to South Asia

LONDON: A UK-based money transfer companies aims to slash the cost of sending cash home for hundreds of thousands of expatriates across the Arab world.

Transferwise is targeting the multi-billion-dollar Middle East money transfer market with a new hub planned for Abu Dhabi that aims to offer an alternative to sometimes costly bank transfers.

Money transfer businesses have mushroomed across the Gulf states and are used by the region’s army of expatriate workers to send funds home each month from Mumbai to Manila. But a raft of new technology startups is rapidly disrupting the sector and driving money transfer costs lower.

UK-based Transferwise, started in 2011 by Estonian entrepreneurs 2011 Kristo Käärmann and Taavet Hinrikus, processes remittances by using two local transfers instead of one international one — avoiding expensive banking fees.

“Money transfers from dirhams have long been one of our most wished for currencies, so we always knew we’d begin our expansion into the Middle East in the Emirates,” said Kristo Käärmann, CEO and co-founder of TransferWise. “The latest World Bank data shows an uptick in the cost of sending money from the Middle East, and there’s such a strong expat community locally who desperately need a better way to manage their money across borders.”

The company has been granted a license to bring its money transfer platform to the UAE and its local unit will be regulated by the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority, it said in a statement on Tuesday.

The company, which serves 6 million customers worldwide, claims to offer money transfers that are up to eight times cheaper the banks in its biggest markets.

It processes $5 billion in customer payments every month and it says that 25 percent of its international transfers are instant.

The company reported revenues of £179 million in the fiscal year ending March 2019, and net profits of £10.3 million. Its backers include Richard Branson and PayPal.

The lion’s share of Gulf outward remittances head to South Asia. Global remittances to South Asia grew 12 percent to $131 billion in 2018, according to World Bank data. That compared to 6 percent growth in 2017.

“The upsurge was driven by stronger economic conditions in the US and a pickup in oil prices, which had a positive impact on outward remittances from some GCC countries,” said the World Bank’s latest Migration and Development Brief.

It estimated that officially recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018. Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017.

However, the global average cost of sending $200 remained high, at around 7 percent in the first quarter of 2019, according to the World Bank’s Remittance Prices Worldwide database.

US trade offensive takes out WTO as global arbiter

Updated 17 min 47 sec ago

US trade offensive takes out WTO as global arbiter

  • Two years after starting to block appointments, the US will finally paralyze the WTO’s Appellate Body
  • Two of three members of Appellate Body exit and leave it unable to issue rulings

BRUSSELS: US disruption of the global economic order reaches a major milestone on Tuesday as the World Trade Organization (WTO) loses its ability to intervene in trade wars, threatening the future of the Geneva-based body.
Two years after starting to block appointments, the United States will finally paralyze the WTO’s Appellate Body, which acts as the supreme court for international trade, as two of three members exit and leave it unable to issue rulings.
Major trade disputes, including the US conflict with China and metal tariffs imposed by US President Donald Trump, will not be resolved by the global trade arbiter.
Stephen Vaughn, who served as general counsel to the US Trade Representative during Trump’s first two years, said many disputes would be settled in future by negotiations.
Critics say this means a return to a post-war period of inconsistent settlements, problems the WTO’s creation in 1995 was designed to fix.
The EU ambassador to the WTO told counterparts in Geneva on Monday the Appellate Body’s paralysis risked creating a system of economic relations based on power rather than rules.
The crippling of dispute settlement comes as the WTO also struggles in its other major role of opening markets.
The WTO club of 164 has not produced any international accord since abandoning “Doha Round” negotiations in 2015.
Trade-restrictive measures among the G20 group of largest economies are at historic highs, compounded by Trump’s “America First” agenda and the trade war with China.
Phil Hogan, the European Union’s new trade commissioner, said on Friday the WTO was no longer fit for purpose and in dire need of reforms going beyond just fixing the appeals mechanism.
For developed countries, in particular, the WTO’s rules must change to take account of state-controlled enterprises.
In 2017, Japan brought together the United States and the European Union in a joint bid to set new global rules on state subsidies and forced technology transfers.
The US is also pushing to limit the ability of WTO members to grant themselves developing status, which for example gives them longer to implement WTO agreements.
Such “developing countries” include Singapore and Israel, but China is the clear focus.
US Commerce Secretary Wilbur Ross told Reuters last week the United States wanted to end concessions given to then struggling economies that were no longer appropriate.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” he said.
The trouble with WTO reform is that changes require consensus to pass. That includes Chinese backing.
Beijing has published its own reform proposals with a string of grievances against US actions. Reform should resolve crucial issues threatening the WTO’s existence, while preserving the interests of developing countries.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies.
“It’s not the WTO that will save the fish. It’s the fish that are going to save the WTO,” said one ambassador.