International Remittances

Launched: September 2016
Status: Applications closed
Projects in implementation stage.

Karandaaz signed grant agreements with 3 challenge winners, totalling PKR 150,000,000 to improve the current mechanism of foreign remittances for overseas Pakistani workers.

Key Challenges

According to The World Bank’s Migration and Development Brief (October 2015), remittances to developing countries were estimated at $435 Billion, an increase of 2% from the previous year. Out of this, $123 Billion is attributed to South Asia (including Pakistan) and is forecasted to rise to $139 Billion by 2018. However, growth of remittances is not only slowing down but is showing a negative trend in Pakistan. In FY 2015, remittances into Pakistan were $18.7 Billion. This figure increased to $19.9 Billion in FY 2016 but is expected to decline in FY 2017. The World Bank cites dire economic conditions and depreciation of currencies against the US dollar as one of the major sources for the decline in growth. There are approximately 7 million Pakistanis residing overseas in about 140 countries. Out of these, 48% are working in the Middle East while around 28% are working in Europe.

On a macro level, foreign remittances provide foreign exchange and help improve the balance of payments. They also help provide income for poor and vulnerable families. The World Bank reports Adam and Page’s (2005) finding that a 10% increase in remittances results in a 3.5% decrease in people living in poverty.

The Opportunity

An opportunity exists to design and implement a remittance system which promises greater outreach, speed, efficiency and cost. With high mobile phone penetration and an increased interest in innovative ICT solutions, the financial services ecosystem is ripe for innovation in this specific area. Karandaaz seeks to support development and implementation of a product or service that bridges the current gaps and has the potential to be transformational for the remittance market

Challenge Recap: ICF1

Innovative solutions were invited to improve the current international remittance products and services available to overseas Pakistanis, hoping to send money into the country. Round 1 of the ICF was designed by Karandaaz in consultation with the Pakistan Remittance Initiative (PRI) to improve the cost, speed, safety and convenience of sending money to Pakistan. In May 2017, Karandaaz signed agreements with three applicants after a rigorous six month selection process. The three selected finalists were:

• Telenor Microfinance Bank (previously Tameer Microfinance Bank)
• Samba Bank
• JS Bank and Paysys Lab (Consortium)

The Innovation

Telenor Microfinance Bank (previously Tameer Microfinance Bank)

Telenor’s approach involves converting Over the Counter and Informal Channel customers into Easypaisa account customers. Easypaisa’s international remittances portfolio kicked off in February 2010, shortly after Easypaisa was jointly launched by Tameer Microfinance Bank and Telenor Pakistan in 2009. Easypaisa is recognized as the first and largest branchless banking solution in Pakistan with footprint in over 75,000 shops, in more than 800 cities across the country. According to Telenor’s business proposal, nearly a million transactions are conducted through Easypaisa everyday by 20 million active customers. As of May 2016, any customer with a smartphone in Pakistan can download the Easypaisa App and register an Easypaisa account.

Telenor is proposing that through their product, customers will be able to receive remittances in four ways through their mobile accounts:

1. Remittance sent directly into Easypaisa account from sender
   i) Pull-Based: customers receive notification of pending remittances and enter transaction information to receive amount.
   ii) Push based: sender pushes remittance directly into mobile account.
2. Converting an existing over the counter transaction to mobile account
   Pull-Based: customer uses long string over SMS/USSD or mobile app to request receiving an existing over the counter transaction in their mobile account. After back-end verification the amount is transferred.
3. Request for remittance
   Using mobile app, beneficiary can request for remittance from sender. Using the transaction reference code, the sender sends required amount to beneficiaries mobile account.
4. International payments
   Easypaisa will extend its bill payments/payments platform to international remittance customers on the sending side. In this way, senders can pay utility bills, mobile-phone credit, grocery bills etc. for beneficiaries using Easypaisa.

JS Bank and Paysys Lab

A consortium between JS Bank and Paysys’ is taking the following approach:

1. Change remittance from Cash on Counter to Transfer to Wallet.
2. Activation teams in 100+ branches in areas with concentration of incoming remittance from UAE to KSA.
3. Education campaign to create awareness on use of wallet for customers.
4. Integration with Mobile Wallet System of foreign partners, so that senders can remit money directly through foreign partners mobile app.

Add-on services on receiver side: Merchant Payments, Utility Payments and P2P Transfers.

Source: JS Bank and Paysys Business Proposal for Karandaaz

JS Bank’s Wallet Ecosystem would allow beneficiaries to remit using a mobile app, agent network, and/or the merchant base:

Mobile App:

• Customers will be able to make Utility Bill payments through mobile application.
• Customers can send money to CNICs and other mobile accounts.
• Interbank funds transfer facility available through Mobile App.
• Customers would be able to biometrically verify themselves through Paysys’ Instascan mobile-based biometric verification solution and open a Lv 1 wallet anywhere and at anytime.

Agent Base:

• JS Bank currently has 30,000 agents Pan-Pakistan.
• Customers can cash out at any of the agent’s location.
• Agent would promote Wallet account opening and Cash Out due to commision structure.
• Non-personalized cards are issued to customers through agent (from local ATM & POS).

Merchant Base:

• JS Bank will leverage upon the bank’s existing relationship with merchants, providing discounts to wallet customers for increasing uptake.
• JS Bank will leverage its existing relationship to increase penetration and mobile wallet uptake, for delivery of remittance/account opening facility at the customer’s’ doorstep.
• Geolocation feature will be added in the mobile app to provide real time discount to Wallet customers.

Samba Bank

Samba Bank Pakistan proposed to work with Global Financial Systems (GFS) and a domestic partner bank to improve the mechanism of foreign currency (FCY) remittances through the digitization of end-to-end FCY remittance process. Following is the summary of their proposal:

1. Partner either with a Saudi or UAE based bank to enable Pakistani expatriate workers to remit funds through Point of Service (POS) terminals deployed at labour camps, corporate offices and retail outlets.
2. Develop a data portal of expatriate workers and their beneficiaries to open their bank accounts in Pakistan, as part of a financial inclusion agenda.
3. Increase the reach of Samba and partnering bank(s) to enable them to serve beneficiaries near their doorsteps.
4. Enter into partnerships with branchless banks and/or microfinance banks to increase market reach.
5. Use data for the development of financial products and services around beneficiaries’ needs.