Capturing the Global Market, Enhancing Competitiveness CASE STUDY:
GLOBAL Remittance
Bansan C. Choa Chairman & Chief Executive Officer, I-Remit, Incorporated
RPs global competitiveness World Economic Forum (WEF) Global Competitiveness Index 2010-2011
The Philippines’ ranking as a competitive economy climbed two notches over the last year, mostly because of the improved score on macroeconomic environment, labor market efficiency and financial market development
The country ranked 85th with an index of 3.96 among 139 countries surveyed.
Likewise, it placed 87th among 133 countries in the 2009-2010 report
. RPs global competitiveness ranking up two notches this year
RPs global competitiveness The Global Competitiveness Index is based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development.
125th in institutions; 104th infrastructures; 68th - macroeconomic environment; 90th - health and primary education; 73rd - higher education and training; 97th - goods market efficiency; 111th - labor market efficiency; 93rd - financial market sophistication; 95th - technological readiness; 37th - market size; 60th - business sophistication; and 11th - innovation
RPs global competitiveness FUNDAMENTALS UNDERPINNING ECONOMIC GROWTH AND DEVELOPMENT
Policy-makers must not lose sight of long-term competitiveness fundamentals amid short-term challenges;
For economies to remain competitive, they must ensure that they have in place those factors driving the productivity enhancements on which their present and future prosperity is built.
Furthermore, a competitiveness-supporting economic environment can help national economies to weather business cycle downturns and ensure that the mechanisms enabling solid economic performance going into the future are in place. Klaus Schwab, founder and executive chairman of WEF / Xavier Sala-i-Martin, professor of economics, Columbia University
RPs global competitiveness THE PHILLIPNES FACES THE FOLLOWING CHALLENGES: applying the rule of law and restoring faith in public institutions;
ensuring food and energy security; planning for natural disasters and climate change;
providing entrepreneurial opportunities, jobs, skills training and education in the countryside;
addressing migration into cities and configuring urban areas appropriately Institute for Management Development (IMD)
The current administration should focus on improving governance to ensure that the program aimed at improving the country’s global competitiveness. It must be noted that improving the country’s competitiveness is not only a government’s responsibility
AGENDA:
FROM THE FRONT LOBBY TO THE BACK OFFICE
Understanding the Global Remittance Market - Market & Opportunities - What’s Driving Remittances? - Who are the Remitters? - Sizing the Market - Remitters as Financial Institutions
Remittances and Financial Institutions - Key Cost Drivers - Customer Challenges & Opportunities - Offer the Right Mix of Products & Services - Compliance and Remittances
Is your Remittance Company Immigrant Friendly? - Front Lobby Tips - Back Office Tips - Integrating the Remittance Service to Your Environment
Ensuring Success - Business Plan and Goal Setting - Staffing/Staff Education - Smart Marketing & Outreach Efforts
REMITTANCE: Market & Opportunities EUROPE 2007 2008 2009
$2,351,704 $2,658,726 $3,061,625
MIDDLE EAST AMERICAS 2007 2008 2009
$8,244,344 $9,213,372 $9,307,781
2007 2008 2009
$2,172,417 $2,502,639 $2,665,031
ASIA 2007 2008 2009
AFRICA 2007 2008 2009
$16,027 $17,749 $22,282
OCEANA 2007 2008 2009
$121,417 $149,423 $212,983
2009 REMITTANCE INFLOWS= US$ 17.35 Billions
$1,543,173 $1,883,996 $2,078,240
WHAT’S DRIVING REMITTANCES? Recent Developments in the Overseas Filipino Workers’ (OFW) Remittance Industry
July 2010, the total overseas Filipino remittances as of for the year have already reached USD10.68 billion representing a 7% growth against the same period in 2009. 11 percent of GDP in 2009, reported by the International Monetary Fund (IMF)
WHAT’S DRIVING REMITTANCES? OFW Deployment (No. of Workers) 1.4M 1.2M 1.1M
15.1%
WHO ARE THE REMITTERS? Skills most in demand in the overseas labor market: household service workers Nurses production and related workers caregivers, Wiremen electrical and related workers Welders flame cutters and related workers, Charworkers cleaners and related workers cooks and related workers Laborers general workers and plumbers, pipefitters and related workers seafarers
WHO ARE THE REMITTERS? Skills most in demand in the overseas labor market: Saudi Arabia showed the highest demand for Filipino nurses in 2009, followed by
UAE, Singapore, Kuwait and the United Kingdom. Other top destinations for nurses during the last five years were the US, Qatar, Taiwan, Ireland and Trinidad and Tobago Taiwan was the top destination for production workers despite a slight dip in 2009 for workers in the semi-conductor, metal workers and electronics sectors. Other countries that depend on the Philippines for production and related workers are Qatar, Oman, Kuwait, South Korea, Canada, Malaysia and Brunei. Demand for caregivers and caretakers was highest in Taiwan, Israel and the United Kingdom in 2009.
SIZING THE MARKET OFW Deployment Trend Outlook for 2010 and Beyond Gulf Estates such as Saudi Arabia, Qatar, Oman, Kuwait and the United Arab Emirates (UAE) have major projects set to start this year Asian region will continue to hire skilled workers and professionals in light of the development plans of these countries to widen their economic base, the report said Employment opportunities for Filipinos in Europe and other regions, however, remain low in light of the global crisis. Emerging employment opportunities for third country nationals in the next five years in Belgium, Cyprus, Czech Republic, Denmark, Finland, Italy, France, Germany, Netherlands, Poland, Sweden, and other parts of Europe like Norway and Iceland due to the EU Blue Card Directive which is now in effect and will open the labor market to highly skilled workers and professionals in the fields of engineering, information technology, medicine, and nursing. New Zealand, Spain, Sweden, Finland, Czech Republic and Australia are prioritizing employment of their own nationals as all are reeling from high unemployment rates due to the financial crunch. United States is currently controlling the issuance of visas for workers even as it reportedly has a shortage of over 200,000 nurses.
SIZING THE MARKET DEPLOYMENT of OFWs
And where do our kababayans hail from here?
National Capital Region Southern Tagalog Central Luzon Ilocos Western Visayas regions.
each worker remits an average of about P128,000 per year or about P 16,000 multiple by average of 8 times a year, discounting their personal savings for purposes of investment. Many of them can raise funds to saves down-payment for capital investment and pay the balance in less than five years time.
SIZING THE MARKET Remittances (US$ 000,000) $16.4B
$17.3B
$14.5B
5.6%
SIZING THE MARKET Behaviours of OFW recipients pertaining to remittances Aging countries are expected to increase their demand for health professionals and eventually other set of professionals who will fill the gap in their labor force. Migration policies will likewise provide the structure on the flow of both permanent and temporary workers. The increasing number of migrants in the population is expected to deepen (more in the same household) and widen (other households in the same geographic area) the scope of migration because of a high probability that migrants will effectively reduce migration costs.
“The drivers and prospects both in the local economy and in the major destination countries will define also the future of migration streams in the country” SOURCE: Philippine Institute for Development Studies (PIDS) Dr. Aniceto C. Orbeta Jr. Michael Ralph Abrigo
SIZING THE MARKET The sustained demand for Filipino manpower worldwide, combined with greater access by workers and their beneficiaries to expanded remittance transfer facilities helped shore up remittance flows.
The higher level of remittances and sustained deployments indicated that labor demand remained strong in
Canada, Australia, United Arab Emirates, Qatar Eastern European labor markets.
REMITTANCES AS FINANCIAL INSTITUTIONS
Key Cost Drivers
Upfront capital outlay – software, technology, implementation and customer service
Marketing costs
Build vs. buy In-house vs. out-source As brand gets established, marketing focus shifts from customer acquisition to retention Loyalty and retention programs
Variable costs
Transaction initiation, customer ID verification, distribution costs, core FX costs
REMITTANCES AS FINANCIAL INSTITUTIONS
Key Cost Drivers
Ongoing support costs
Technology, product enhancements, data center and program management
Pricing varies significantly by service, distribution network, type of product and destination country Costs
Remittance fees for sending and possibly for paying out transfer Exchange rate spread Difference between foreign exchange rate at which remittance provider buys currency and retail exchange rate applied to sender’s transaction Can be a hidden fee to the receiver
REMITTANCES AS FINANCIAL INSTITUTIONS
Challenges & Opportunities CUSTOMER- CHALLENGES Some potential customers might be unbanked Lack of traditional documentation Special marketing and customer service needs
Language barrier for extended remittance corridors (ex. Chinese or Indonesian remittance) Hours of operation to match with the remittance population’s needs
Money transfer businesses dominate remittance market
Estimates of remittances sent through banks vary from 30% to 40% of transfers
REMITTANCES AS FINANCIAL INSTITUTIONS CH
Challenges & Opportunities
FASTER SPEED >>> the amount of time by which the money sent is delivered to the beneficiary in the Philippines In the past – 24-hr service delivery for MM and 48-72 hrs in the provinces was acceptable Today – on-line, real time services
REMITTANCES AS FINANCIAL INSTITUTIONS
Challenges & Opportunities
HIGHER Higher operating costs amidst narrowing margins Regulators in all countries have strengthened their KYC/AML laws that resulted to higher operating expenses attributed to: - System enhancements - Increased staff expenses - Increased fees by overseas depository banks
REMITTANCES AS FINANCIAL INSTITUTIONS
Challenges & Opportunities
STRONGER Need for stronger, wider and diverse distribution channels Enhancement of acquisition and distribution channels Identification and development of alternative acquisition and distribution channel to address the customers value for SPEED and CONVENIENCE
REMITTANCES AS FINANCIAL INSTITUTIONS
Challenges & Opportunities
REAL TIME Online to Online Services mainly used to transport data files between remittance companies abroad and their fulfillment partners in the Philippines. The data files in an agreed format are processed and sent out again via internet for distribution to the ultimate partners – branches, ATMs and couriers
Online Transactions websites where overseas Filipino workers can actually transact from the convenience of their homes through their PC
REMITTANCES AS FINANCIAL INSTITUTIONS
Right Mixes of Products & Services OFFER THE WIDE ARRAY OF SERVICES Low-cost and fast crediting of remittance services reloading to cash card which enables the recipient to receive the money real-time
Online Transactions/Phone-In convenience of remitting in the comfort of their home or offices
Home delivery for older recipients the door-to-door facility which enables you to deliver the money right at the recipients doorstep
Cash pick up anywhere remittance pick-up nationwide in any designated pick centers
Deposit or credit to your bank account bank-to-bank method where remittances can be credited to recipient own bank account
REMITTANCES AS FINANCIAL INSTITUTIONS
Compliance & Remittances Customer Identification Procedures Record-Keeping Procedures
Reporting Procedures FATF40 Recommendations & 9 Special Recommendations
Republic Act 9160: Anti-Money Laundering Act (as amended by RA 9194) BSP Circular 471 Series of 2005
Internal Control Procedures
Compliance Review Program
Employee Training Programs
IS YOUR COMPANY IMMIGRANT FRIENDY?
FRONT LOBBY TIPS Adapt to serve unbanked and migrant consumers’ financial service needs Financial education is vital Need to change customer behavior in all operating countries
Reach out to immigrant communities to develop new customer relationships Consider more convenient branch locations and hours
Offer more than one type of remittance product to meet the needs of all customers
IS YOUR COMPANY IMMIGRANT FRIENDY?
BACK OFFICE TIPS Determine necessary payment information to collect from customers in accordance with origination and compliance practices Continue to invest heavily your information technology infrastructure and telecommunication systems Pre-fill registration forms for front lobby to streamline required and repetitive information Ensures that the customer service center operates on a 24/7 mode to provide the needed assistance to remitters and their beneficiaries, anytime. Practice good corporate governance at all times
IS YOUR COMPANY IMMIGRANT FRIENDY?
INTEGRATING THE REMITTANCE SERVICE TO YOUR ENVIRONMENT “Remittance corner”
Separate space dedicated to remittance services No waiting in general teller line for remitters Efficient systems for repeat customers Placards advertising exchange rates
Signage directing customers Implement visible and effective visual display to communicate your services
Community outreach Make people aware of services offered
ENSURING SUCCESS
Business Plan & Goal Setting You business planning should be aligned to your overall goal as a global institution Determine your objective in offering remittances Transaction count vs. transaction value
Be realistic about your goals Number of transactions, new accounts, currency volume, etc. Cross-selling, up-selling Brand-building New product development and enhancement
ENSURING SUCCESS
Staffing / Staff Education Foreign language-speaking staff Puts immigrant customers at ease Creates customer preference and loyalty
Educate all staff on service features and cultural differences Offer employee incentives to increase remittance volumes
ENSURING SUCCESS
Smart Marketing & Outreach Efforts Target marketing to the community
Foreign-or local language radio, television and publications important Participate in fairs, festivals, community events Utilize familiar customs, music, cuisine, etc. Promote special offerings for high-volume remittance times Ex. Mother’s Day and religious holidays
Partner with chambers of commerce and consulates Co marketing with other institutions targeting similar market Research migration corridors to connect both sides of the transaction Financial education plays important role in success of program Roll out financial literacy programs for migrant workers
CONCLUDING NOTES Summary of the key areas in capturing the global market and enhancing competitiveness differs 1. New Competitors in New Market: Taking your remittance services to the other country means to face foreign competitors in the foreign market that are providing alternatives for your services. 2. Product/Service Acceptability: This another vital aspect of globalization that may affect directly to the business sales. In this decision has to be made sensibly and carefully regarding the product or service launch that whether the people will like what we offer? How we render the remittance services, whether it will be appreciated or degraded? 3. Location Analysis: Before going to the globalization process, the entire organization have to analyze the market conditions from every geographical aspects to see where the target audience is mostly located. So that there should be enough consumers in that region. 4. Multicultural Management: Globalization of a business brings in workforce diversity and from which the organization faces another challenge to build a business oriented culture among workforce hired from different demographical locations, different religions, different values etc
THANK YOU & MABUHAY!
