Banks giving forex firms a run for their money with free remittances
dubai — The UAE’s currency exchanges engaged in the remittance business are increasingly feeling the heat as banks are becoming more active in offering free remittance services to their account holders through online banking.
A number of local banks in the UAE are currently offering a free online remittance service, giving a tough time to exchange houses, which on average charge in the range of Dh16 to Dh22 for remitting funds.
First Abu Dhabi Bank is running an online and mobile banking remittance service for unlimited free international transfer for selected currencies. Emirates NBD is also offering direct remittances to Asian countries through online and mobile banking in 60 seconds for free. Similarly, other banks also run promotions and offer free money transfers to expats.
With the introduction of value added tax (VAT) from January 2018, online remittances could gain momentum from expatriates, which make up more than eight million of the UAE’s population.
Rajiv Ashok Raipancholia, treasurer of Foreign Exchange and Remittance Group, said it has become a challenge with banks going digital, offering free remittances.
“Difficulties have increased… For our business to survive, banks are very important. Banks are a major lifeline for our business. If we don’t have banks to work with, the future looks very difficult. So we continuously have dialogue as a group with the banks,” said Raipancholia, who is also CEO of Orient Exchange.
Raipancholia was speaking on
If we don’t have banks to work with, the future looks very difficult. So we continuously have dialogue as a group with the banks Rajiv Ashok Raipancholia, Treasurer of Foreign Exchange and Remittance Group
the sidelines of Ferg’s recent annual general meeting. Ferg is a body comprising businesses engaged in the money exchange and remittances industry. He noted that Ferg is continuously communicating with banks. “Continuous knowledge-building has improved t with the banks,” he added.
UAE exchange houses said they would pass on the VAT cost on remittance fees to consumers. There are approximately 125 exchange houses in the UAE with over 1,000 branches, employing around 13,000 people with UAE nationals making up 9.5 per cent of the workforce.
According to the Central Bank of the UAE figures, the total value of remittances by foreign workers in the UAE reached Dh78 billion during the first half of 2017, representing 48.5 per cent of the total balance of payments in the country in 2016 amounting to Dh160.8 billion. Indian workers continued to be top remitters followed by Pakistanis, Filipinos, Egyptians and British.
Regarding competition from the banking industry, Mohammed Al Ansari, chairman of Ferg, said banks are traditionally not interested in this business because it needs a lot of infrastructure and they may get away from their core business.
“Nevertheless, banks are looking at more seriously about online payment services, so a customer is not physically required to visit outlet to make a payment transfer. But they [banks] will eventually come into the business and this will affect the trend of the market. Most of the currency exchange houses are also adopting the service as they have good advanced online payment technology systems,” he added.
Al Ansari noted that the global money transfers industry is witnessing, on average, a five per cent growth as more and more people travel.
Adeeb Ahamed, managing director of Lulu International Exchange, said the company currently has around 70 branches in the UAE and “it’s a good number that we have this point of time”. He pointed out that the company is currently focusing on consolidation in the region and aims to expand to Asia-Pacific countries including Indonesia, Malaysia, the Philippines and Hong Kong, among others.
— waheedabbas@khaleejtimes.com