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.