PENETRATING LOCAL REMITTANCE SECTOR

‘Global entities must have solid plans to give value to customers’

FOREIGN companies that intend to penetrate Malaysian remittance business must outlay solid business plans they could bring to the Malaysian market, and how they could give value proposition to customers in the country, particularly foreign workers and expats.

An industry expert, who is attached to one of Malaysia’s largest remittance and foreign exchange business, said the domestic remittance market was different from other Southeast Asian countries, and market acceptance was also a key factor to be studied.

Last week, Reuters reported that Chinese tech giants Alibaba and Tencent recently launched money-transfer services that allowed Hong Kong-based workers from Indonesia and the Philippines to send money home in a cheaper and easier way.

The report said the move was a first step taken towards a global remittance business that moved more than US$600 billion (RM2.5 trillion) around the world annually. While there are chances that both Alibaba and Tencent will be knocking Malaysian doors soon, experts say foreign players must be ready to face several hurdles, especially with regards to licensing from regulators before they can initiate operations.

“If their model just offers free service charges, is it acceptable? How successful are they in the Hong Kong and Philippine corridors? For instance, take Tencent, via WeChat which launched a year ago for free... Can they challenge the current brick and mortar guys and online customers who currently have direct access into this market?” he said when asked on Alibaba and Tencent coming to Malaysian shores.

He said foreign players must check local market readiness in bringing new disruptive technologies in the remittance business.

In doing remittance business in Malaysia, some important elements that need to be considered are being a trusted brand, speed of delivery, channel of delivery — be it online or offline — and the strength of payout partners that are able to support the service.

“Many players come with huge cash, but they don’t necessarily know how to win the market.

“For instance, Western Union is a 150-year-old company that is still growing because of the strength in payout, delivery and trust, even the fact that it has been through a lot of disruption.”

The Malaysian Association of Money Services Business chief executive officer Shalini Pavithran said the association was not aware of Alibaba and Tencent’s local remittance licence application and was not in position to confirm it.