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Western Union Remittance Strategy
- 1. Bain & Company Western Union Remittance Strategy Fall 2016
- 2. Bain & Company SIBC Analysts Daniel Murphy Junior Mech Engineering & ACMS Riverside, IL Jose Fernandez Trevino Sophomore Pol. Science & Economics Monterrey, Mex Roberto Elosua Gomez Sophomore Finance & Stats Monterrey, Mex Blair Yiyang Hu Sophomore Pol. Science & Economics Shanghai, China Regina Zavala Rangel Freshman Economics Monterrey, Mex Yiling Zhou Sophomore Finance & Economics Shanghai, China Miles Wood Freshman Business & ACMS Kansas City, MO Connor Murphy Sophomore Pol. Science & Economics Portland, OR 2 Meredith Henry Sophomore Liberal Studies & Film/Television Harrison, NY Bernadette Grant Sophomore Undecided Business Chappaqua, NY
- 3. Executive Summary Client Western Union is global financial services company specializing in payments. 80% of its revenue comes from remittances, or C2C international payments. Situation Western Union’s relatively large remittance market share is declining, though the overall industry is growing. Western Union is mainly struggling with problems of reach and costs. Solution Western Union should integrate brick-and- mortar partnerships with a new digital platform to target underbanked populations in developing countries and reduce transaction costs. 3
- 4. Western Union should integrate new physical partnerships with a reengineered digital platform Oasis Objectives Oxxo / Safaricom Locations Leverage WU Connect Stellar Mobile Platform Impact Greater Reach Greater Profitability Lower Transaction Costs 4 Physical Partnerships Digital Platform $WU Partner with companies with large reach as withdrawal points Leverage WU Connect’s reliability and interface to streamline development Partner with Stellar to create blockchain–based mobile payments platform Expand Market Share by targeting mobile users in developing countries Revenue Stellar’s blockchain technology can reduce transaction costs by 25%Costs
- 5. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 5 Remittance Market Overview Informal Reach Costs
- 6. 6Sources: Morningstar, Business Essentials Western Union’s remittance-dependent business model is under pressure Background • Founded in 1851 • Provides money movement and payment services world-wide Business Segments Consumer to Consumer •Allows people to quickly send or receive money anywhere around the world •80% of revenue and 90% of profits Consumer to Business •Singular or recurring payments to businesses •International B2B cross- border, cross- currency payment services Business Solutions •Facilitates payments for small and medium enterprises across borders and currencies Gross Profit Margin DeclineRevenue Stagnation and Decline 500,000 agent locations worldwide 100,000 ATM Locations 0 2 4 6 8 10 12 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue(inbillionsofdollars) Year 37 38 39 40 41 42 43 44 45 46 47 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GrossProfitMargin(%) Year CAGR: -1.3%
- 7. 7Source: Save Western Union has made several efforts to develop technologies that respond to the digital evolution of the remittance industry WU Connect: P2P Payment Solution WU.com Consumer Propensity to use WU Connect Explosive Growth of WU.com (Q1 2016) • Allows money to be sent over social media and consumer messaging platforms Viper and WeChat • Can send up to US $499 for pickup at agent locations in 200+ countries • Can fund money using credit card, debit card or bank account and send to agent location, a mobile wallet, or bank account • Leverages trusted brand name with enhanced customer engagement Offers online money transfer services Send from a bank account, credit or debit card to a mobile phone or bank account Can send up to US$3,000 and even more using online foreign exchange service 80% of new WU.com customers are new to Western Union Viber WeChat US +56% +43% UK +67% +76% 18% 1% -1% 1% -1% 5% 0% -2% 3% 8% 13% 18% 23% WU.com Total C2C Revenue Growth Middle East and Africa Latin America and Carribean Asia Pacific North America Europe and CIS Growth
- 8. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 8 Remittance Market Overview Informal Reach Costs
- 9. 92016 10K, SaveOnSend, Infosys, Pew Research Center The worldwide remittance market is experiencing growth driven by developing nations Basic Overview Geographical Overview Segments Market Share $586B Industry in 2015 $436B to developing countries Remittances have steadily climbed since 1970 Expected $636B Industry by 2017 Top Remittance Senders United States ($133B) Saudi Arabia ($46B) United Arab Emirates ($30B) Germany ($23B) Russia ($16B) Top Remittance Recipients India ($69B) China ($64B) Philippines ($28B) Mexico ($25B) Nigeria ($21B) 41% 16% 21% 22% MTOs Banks Digital Hawala/Informal Takeaways •3.5% growth projected from 2015 to 2017Growth •74% of remittances sent to developing world •Majority of growth comes from developing markets Developing World
- 10. 10Infosys, World Bank Digitization has disrupted the remittance industry, creating downward pressure on fees and necessitating responses from established players Technological Shift Consolidation in the Industry Decreasing Remittance Fees in All Segments Exploration of Alternate Platforms Social Media Platform Money Transfer Service Increased Accesibility 90% of money transfer between friends and family Facebook and WeChat have extensive international consumer base Traditional agent-based business models are diversifying into new revenue streams Innovative money transfer players looking to become generic money management players Example: PayPal acquired Xoom for US$890m in 2015 Digital services account for 53% of the industry Proliferation of smartphones among remittance senders and receivers Average digital money transfer fee of 5.32% in 2015 2011 • 9.30% 2012 • 9.00% 2013 • 8.93% 2014 • 7.96% 2015 • 7.37%
- 11. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 11 Remittance Market Overview Informal Reach Costs
- 12. Infoysys, World Bank, McKinsey & Company, GSMA, Pew Research Center, SaveOnSend 12 10% 11% 12% 13% 14% 15% 16% Costs Mobile money based remittances are fastest growing remittances product by transactions volumes with a rate of +52% Reach Western Union Global Market Share Decreasing Remittance Fees Downward Margin Pressure Key Trend: Digitization Despite growth in the remittance industry, Western Union’s market share is decreasing due to fee pressure and digitization, creating a problem of reach and costs
- 13. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 13 Remittance Market Overview Informal Reach Costs
- 14. 14World Bank, S&P Capital IQ, MoneyGram, Ria Financial Services MTOs, although they comprise the largest segment, are facing decreasing market share and margins Major Players Services Overview Methods of Money Transfer Quantitative Analysis Money Transfer Currency Exchange Bill Payment Prepaid Debit Cards Check Cashing Money Orders Send money online Send money in person Send money directly to bank accounts Send money to a mobile wallet Send money to an inmate Market Share 41% Margins 25% Average Transaction Size $200 9.3% Fee 13% 4% 5%
- 15. 15S&P Capital IQ, Ria Financial Services, Interview with Tim Fanning (Former COO of Ria Financial Services) Company Overview Interview with Former COO Ria and 7-Eleven Partnership Fee Structure Average Intl. Transfer: $300 Estimated Average Intl. Fee: ~7-8% Founded: 1987 Headquarters: London, England Company Description: Operates the Money Transfer segment of Euronet Worldwide, Inc. As the third largest money transfer company in the world, Ria has a global agent network of over 316,000 locations in 150 countries worldwide. In addition to money transfer services, the company offers bill payment, mobile top ups, prepaid debit cards, check cashing, and money orders. WU experiencing price pressure from third parties People want to go to a branch, hand money to a person, and let the recipient collect it in person Cash isn’t exiting the market because of its ease of use and anonymity Money Transfer services available in 7-Eleven Card-based, telephone originated remittance Failed due to lack of personal interaction Fee Send/Pick-up Methods Destination Send Location Money Amount Ria’s comparable business model reveals the risk of specific expansion strategies
- 16. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 16 Remittance Market Overview Informal Reach Costs
- 17. 17 Segment Overview Receive 70% of volume globally. Top 4 US banks are responsible for half of all banks remittance volume. Banks retreating from money transfer industry due to high regulations. 61 52 69 57 48 40 59 40 32 33 51 11 0 10 20 30 40 50 60 70 80 % I trust traditional banks more than I do online banks Using a peer-to-peer lender is riskier than getting a loan from a traditional bank or credit union I would consider using banking services from a nonbank (i.e. Walmart) Trust in Traditional Banks Segment Response to Technology More people trust traditional banks over online platforms. The underbanked sector would rather get a loan from a traditional bank. Trust in traditional banks rises with household income, but so does demand for other alternatives. Increasing e-commerce and electronic payment technology will bring revenue growth Majority of revenue comes from data processing and transaction fees from credit/debit purchases. Ratio of electronic payments to cash payments has increased. Transaction volumes for processors in industry have gone up. People tend to trust traditional banks over other money-transferring alternatives
- 18. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 18 Remittance Market Overview Informal Reach Costs
- 19. Business Structure 19 Worker in Country 1 Family in Country 2 Broker in Country 1 Broker in Country 2 $ $ Call / Fax / Email Definition: An alternative, informal remittance system that works by transferring money without actually moving it. It usually involves a hawaladar (broker) delivering money from his cash reserve or account at the request of a counterpart hawaladar in another country who is serving a client Remittance Code Remittance Code Balancing Methods: Hawaladars usually well- connected business owners Illegal: Smuggling of currency, commodities or invoice manipulation Legal: Money transfers using conventional bank routes, postal money orders and goods swaps Chief Organizer, UN, IMF, Global Development Research Center, William and Mary, WAIFEM, Regalii Informal money transfers through legal and illegal channels rely on the personal networks of brokers
- 20. 120 Days 7 Days 65%53% 20 Pros •System is self-regulating, it is rare for hawaladars to defraud one another or their clients •Very small operating costs and ensures anonymity for clients •Cash based without any need of formal banking (ideal for unbanked clients) Cons •Moderate barriers to entry (must know a trusted hawaladar to participate) •Due to its obscure and informal nature, extremely hard to regulate (illegal in some countries) •Money laundering and other criminal activities rampant in system Market Share ~22% Margins 2% Average Transaction Size $200 .25% to 1.25% Fee Quantitative Analysis • The UN estimated that $100-$300 billion moved through informal money transfer systems • Margins are expected to stay at around 2% for the foreseeable future • Very little overhead compared to other formal transfer channels • Enables hawaladars to charge much lower rates than alternative official channels Evaluation of Hawala System Chief Organizer, UN, IMF, Global Development Research Center, William and Mary, WAIFEM, Regalii The Hawala system is low-cost but presents serious regulatory issues
- 21. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 21 Remittance Market Overview Informal Reach Costs
- 22. 22 FinTech, a new segment, is poised to take over the remittance market Traditional Remittance Digitization 1. Less buildings and personnel means less costs. 2. Virtually Instantaneous 3. Travel less distance for money, less liquidity (theft) • Over $24 billion in investments over past six years • More than 5,000 FinTech Startups Quantitative Analysis Market Share 21% Margins 1% Average Transaction Size $1500 3.46% Fee Relevance 40% global internet access 63% global mobile phone penetration Digitization
- 23. 23Source: Forbes, The Economist M-Pesa offers a blueprint on how to successfully integrate digital and physical payment systems Diverse Partnership in Creation • M-Pesa was created by a joint venture between UK’s department for International Development and Safaricom (Vodafone). Volume of Transactions • Over 43% of the value of GDP in Kenya in 2013 flowed through M-Pesa • 237 million person to person transactions in that year. Inclusiveness • Extended financial inclusion for 20 million Kenyans. • By 2011 more than 72% of the people in Kenya living under $1.25 a day used M-Pesa Expansion • M-Pesa later evolved from only a payment facilitator to a provider of loans and savings products. • M-Pesa can also be used to pay salaries and bills. Critical Success Factors Effects Household income increased by 5-30% due to M-Pesa’s efforts Decrease in time spent going to bank, standing in line, etc. •Experienced troubles in expansion Trouble replicating • Weak law enforcement in target areas Corruption and Money Laundering • 255 services in 89 countries Severe International Competition Challenges
- 24. 24 SIM Card •Phone often borrowed in rural settings Balance • Can be deposited at convenience stores of M-Pesa users do not have a bank accounts 40,000 agents Safaricom Retailers Select Banks Bank Aversion Requirements Partnerships: M-Pesa Agents Physical Integration: M-Pesa Agent Tasks 60% Key Demographic: Underbanked Registration into system Deposits/Withdrawals Customer Education Seamless Integration of Physical and Digital M-Pesa limited requisite technology and partnered with existing retail networks to expand its service
- 25. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 25 Remittance Market Overview Informal Reach Costs
- 26. WesternUnion.com, TransferWise.com, Infosys, World Bank, Reuters, SaveOnSend 26 Consequences of Fee Pressure 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% $50 $100 $150 $200 MTO Mobile w/ Cash Mobile w/out Cash Average Remittance Costs Industry Responses Reach Costs FinTech companies are creating downward fee pressure, straining traditional players with respect to reach and costs • Share of FinTech segment devoted to payments 35% • P2P payments growth $174 billion
- 27. The FinTech segment offers the most upside potential in the future of the remittance market Segment Mkt. Share Share Trends Margins Margin Trends Avg. Fee Barriers To Entry Regulation Overall MTOs 41 % Negative 25 % Negative 9.63 % N / A Medium Banks 16 % Neutral 12 % Negative 11.18 % High High Informal 22 % Neutral 2 % Neutral 1.00 % High Medium FinTech 21 % Positive 1 % Positive 3.46 % Low Low Summary of Analysis of Remittance Market Segmentations Factors Supporting an Entry Into The FinTech Segment Mkt. Share Trends • Only FinTech segment has positive growth Customer Type •Underbanked •Represents 75% of overall market Success of Startups •M-Pesa handles 43% of the value of Kenya's GDP Efficient Solution •Best area for solution given constraints: time, budget, feasibility 27
- 28. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 28 Remittance Market Overview Informal Reach Costs
- 29. Western Union can alleviate its reach and costs problems by adapting the M-Pesa model Days 65% 29 Solution: Expand M–Pesa Model Reach: Falling Market Share Costs: Falling Remittance Fees Problem: FinTech Player Entering Remittance Market Partnerships Physical-Digital Integration Physical: Convenience Stores Digital: Stellar Partnership Flexibility in Partnerships by Use - Case / Country • Physical locations serve: • to reach customers • as withdraw points • REACHES more customers • Stellar partnership serves: • to reduce costs • to digitize use • Reduces COSTS • Flexibility in integration • target large physical partners by country • utilize local infrastructure Impact Risks Implementation Reduced costs and greater market share will produce $204- $957 MM in profits With Stellar, Oxxo, and WU Connect, this strategy can be implemented by late 2017 2017$ Security, regulatory, and brand confidence risks have been addressed
- 30. 30Stellar, Western Union Western Union and other remittance companies have pursued comparable partnerships Stellar Overview WU - Oxxo Partnership •Nonprofit that connects people to low-cost financial services The Organization •Made up of servers that contain a shared database of all accounts on the networkThe Network •Entities that connect to the stellar network and lets incompatible organizations interact efficiently Gateways •Developed at the local level Users and Services Partnership with Deloitte and Tempo Deloitte Partnership Reduce cost of transfers by up to 40% Transactions completed in 5 seconds Tempo Partnership 600,000 transactions for $.01 Increase transparency and reduce remittance fees • Partnership with Mexico’s largest convenience store chain with 14,000 locations • Flexibility: three modes of payout • Doubles retail network in Mexico
- 31. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 31 Remittance Market Overview Informal Reach Costs
- 32. Western Union can cut variable costs to lower its remittance fees and win market share 32 Demand Curve Logistic Concave Convex Shape S(P) Pros Diminishing returns to raising and lowering fees Diminishing returns as fees approach 0 Traditional approach, data-driven elasticity Cons Assumes higher market share at high fees Diminishing decreases not present as fee grows Monolithic elasticity unrealistic In order to calculate the effect of lowering remittance fees on the overall market share, we need to assume a demand curve that accurately portrays the remittance market. Profit Revenue Market Size Market Share S(P) Price per Remittance Costs Fixed Costs Variable Cost C(P) Profitability Optimization Model
- 33. 0% 10% 20% 30% 40% 50% 60% 70% MarketShareS(P) Fee Market Share vs. Fee WU 10K Successful implementation of the solution greatly increases both market share and profit 33 Logistic Demand Model ($2.0) ($1.5) ($1.0) ($0.5) $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 Profit(inbillions) Fee Profit vs. Fee Scenario Base Case Worst Case Best Case Description Current WU Situation Failure to increase market share Grow share and maximize profit Fee 9.3% 8.1% 8.1% Market Share 13% 13% 19.9% Profit (Net Profit) $1.04bn ($0) $1.31bn (+$265 MM) $2.0bn (+$957 MM)
- 34. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 34 Remittance Market Overview Informal Reach Costs
- 35. 35Source: Western Union 10K In a competitive, dynamic environment, successful implementation is challenged by a number of risks •Price reductions reduce margins and adversely affect financial results in both short term and long term if transaction volumes do not increase sufficiently. Reduction in Margins •Poor performance of third-party businesses may impair their ability to provide services to Western Union and have a potential impact on Western Union’s own business. Third-Party Business Performances •Insufficient professional qualifications, knowledge or skills in money transfer services of third-party agents may damage the reputation of Western Union and confidence in brand Customer Confidence in Brand •Third-party locations that have low security protection such as 7-Eleven and Starbucks may be more vulnerable to thefts, robberies and other criminal activities Physical Security of Third-Party Locations •Additional regulations such as customer identification, agent due diligence requirements, enhanced recordkeeping or transaction monitoring may be difficult to comply with New and Increasing Regulations •Stellar’s virtual system and its own digital currency lumens are at risk from hackers, malware and operational glitches that could result in huge losses Stellar’s Cybersecurity
- 36. Problem Identification Western Union Overview BanksMTOs Western Union Remittance Strategy FinTech Analysis and Comparison of Segments Recommendation: Physical-Digital Integration RisksImpact Timeline 36 Remittance Market Overview Informal Reach Costs
- 37. By leveraging Western Union’s current resources, this strategy can be implemented by the end of 2017 37 Q1 2017 Reach Out and Confirm Physical Partnerships Secure Partnership with Stellar Review Regulatory Compliance Q2 2017 Trial at Selected Stores Integrate WU/Stellar Engineers Beta Test Platform Q4 2017 Marketing to Target Countries Offer Discounts to New / Loyal Customers Record Data on Platform Performance 2018 Beyond Profit Optimization Expand Into Rural Markets Expand from C2C to B2B Implementation Timeline Long-Term Planning Phase 1 Phase 2 Phase 3 Phase 4 Product Development Official Launch of New Strategy Joint Venture Proposals Successful Implementation Grow market share, reduce costs, and mitigate FinTech threat
- 38. 38 Identified Problems In Western Union Remittance and Segment Analysis Western Union Remittance Strategy: Objectives, Implementation, and Addressed Risks Summary Western Union’s remittance business struggles in reach and cost The most attractive strategy involves entering the FinTech segment of the market The FinTech segment is the fastest growing segment, and has the lowest costs Many consumers in developing countries only use digital platforms Western Union should integrate physical and digital partnerships Partnership will stellar builds a digital platform, reducing costs by 25% Partnerships with Oxxo and Safaricom give physical locations to withdraw cash Implementation of strategy is achievable by the end of 2017 Potential security, regulatory, and implementation risks have been addressed “Western Union is the largest player in the international remittance business, but is losing its market to FinTech players. To combat downward pressure on fees, Western Union should integrate digital and physical partnerships to reach greater markets in developing countries and decrease costs associated with sending money.” Conclusion
- 39. APPENDIX 39
- 40. Appendix 1: Details and Assumptions for Recommendation Impact Calculations 40 WU 10K Data Solution Calculations Transaction Fees $3,221,000,000 For Ex $1,057,100,000 Other Revenues $65,800,000 Total Revenue $4,343,900,000 Operating Expenses $3,301,364,000.00 Operating Income $1,042,000,000 Operating Margin 24% Remittance Market $553,701,000,000 WU Market Share 13% WU Fee 9.30% WU Remittance Volume Remittance Market * Market Share = $71,981,130,000 Realized Remittance Rate Revenue / WU Remittance Volume = 6.03% Realized to Fee Scaler Remittance Fee / Realized Remittance Fee = 1.5411 Total Remittance Fees WU Remittance Volume * Remittance Fee = $6,694,245,090 Realized Remittance Fees WU Remittance Volume * Realized Remittance Fee = $4,343,900,000 Realized Operating Income Operating Margin * Realized Remittance Fee = $1,042,536,000 Cost of Sending $1 Operating Expenses / Remittance Volume = $0.045864 Marginal Revenue/$1 Sent Realized Remittance Fee = $0.060348 Income/Dollar Sent Cost of Sending $1 – Marginal Revenue/$1 Sent = $0.014483 Income Income/Dollar Spent * WU Remittance Volume = $1,042,536,000 Cost Reduction Calculations Calculated Data (WU Specific) Costs Reduction (Assumed) 25% New Cost of Sending $1 (1-Cost Reduction) * Cost of Sending $1 = $0.034398 Desired Income per Dollar Spent Income/Dollar Sent = $0.014483 Target Marginal Revenue Cost of Sending $1 + Desired Income/Dollar = $0.048882 New Realized Remittance Rate Target Marginal Revenue = 4.89% New Remittance Fee Scalar * New Realized Remittance Rate = 7.53% Fee Realized Fee S(P) Revenues Costs Profit Last Fee + (WU Realized Remittance Fee – Min Fee) / 15 = Fee * Realized to Fee Scalar = 1 / (1 + Exp(100 * (Fee – (Realized Remittance Fee * 100 – 1.734) / 100))) = Remittance Market * S(P) * Fee = Remittance Market * S(P) * Other Revenues = Revenues – Costs = 0.052538 0.08096494949 0.1990282167 $5,789,822,092.17 $3,790,757,247.98 $1,999,064,844.19
Notas do Editor
- Western Union has suffered an overall decline in marginal profits over the last of years due to the evolution of the industry and increased competition, among other factors.
- 3.5% growth from 2015 to 2017, Dev countries ~74% Global Market Share graph: https://www.saveonsend.com/blog/western-union-money-transfer/ Remittance Industry Growth: http://www.worldbank.org/en/news/press-release/2015/04/13/remittances-growth-to-slow-sharply-in-2015-as-europe-and-russia-stay-weak-pick-up-expected-next-year Remittance Map: http://www.pewglobal.org/interactives/remittance-map/
- McKinsey & Company Global Payments 2015 A Healthy Industry Confronts Disruption Report GSMA 2015 State of the Industry Report Mobile Money Remittance Map: http://www.pewglobal.org/interactives/remittance-map/ Global Market Share graph: : https://www.saveonsend.com/blog/western-union-money-transfer/
- Miles
- Miles
- Sources: http://chieforganizer.org/2011/07/11/informal-hawala-remittance-system-huge-competitive-and-dangerous/ http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1036&context=wmblr http://www.waifem-cbp.org/v2/dloads/FORMAL%20AND%20INFORMAL.pdf http://www.un.org/esa/desa/papers/2002/esa02dp26.pdf http://www.imf.org/external/pubs/nft/op/222/ https://www.regalii.com/blog/who-s-to-blame-for-high-fees http://www.gdrc.org/icm/hawala.html
- Sources: http://chieforganizer.org/2011/07/11/informal-hawala-remittance-system-huge-competitive-and-dangerous/ http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1036&context=wmblr http://www.waifem-cbp.org/v2/dloads/FORMAL%20AND%20INFORMAL.pdf http://www.un.org/esa/desa/papers/2002/esa02dp26.pdf http://www.imf.org/external/pubs/nft/op/222/ https://www.regalii.com/blog/who-s-to-blame-for-high-fees http://www.gdrc.org/icm/hawala.html
- Sources! Statista
- http://www.economist.com/blogs/economist-explains/2013/05/economist-explains-18 http://www.forbes.com/sites/danielrunde/2015/08/12/m-pesa-and-the-rise-of-the-global-mobile-money-market/#28d8b7c323f5
- http://www.safaricom.co.ke/personal/m-pesa/get-started-with-m-pesa/m-pesa-agents
- In addition to pressure from competitive fee pricing, Western Union is losing market share as fintech companies target Peer-to-Peer payments http://uk.reuters.com/article/uk-transferwise-volumes-idUKKCN11B11S Two Bottom Graphs: https://www.saveonsend.com/blog/money-transfer-services/
- https://www.infosys.com/industries/cards-and-payments/resources/Documents/money-transfer-industry-2016.pdf http://www.businessinsider.com/the-top-global-markets-for-sending-and-receiving-remittances-2015-7
- Worked with Stellar to develop a mobile app and extend reach Cross-border payments as easy as Venmo Reduces cost of transfers by up to 40% and completed transaction in 5 seconds Western Union http://ir.westernunion.com/news/archived-press-releases/press-release-details/2016/Western-Union-Launches-Digital-Self-Service-with-OXXO-and-Nearly-Doubles-Retail-Network-in-Mexico/default.aspx The most significant cause of high transaction fees is friction, as there are limited connections between financial institutions and systems. Stellar provides a platform for these organizations to interact, facilitating expedient, low-cost payments between currencies and across borders. Gateway=any network participant you trust to accept a deposit in exchange for credit on the network Major cause of high transaction fees is friction, money moves slowly and inefficiently between countries. This is because there are limited connections between financial institutions and systems. Inefficient, siloed infrastructure (paypal, empesa, etc). Hard to send small transactions Built common, open platform for financial transactions Open-source network that allows financial institutions, governments, nonprofits, microfinance organizations to connect to each other in a swift like manner so that they become interoperable between themselves Builds infrastructure for companies to connect to get efficient services between one another Platform for remittance companies to expand across the world 4 million accounts on the platform Similar problem in transportation and mail (used to be siloed) -Subway lines were different companies but now they’re interoperable -Mail: went from private services to national postal services to email -evolution to participatory and networked systems Functions on three levels The Network: servers on the stellar network keep the system functioning and safe. Anyone can run a server and each server contains the shared database of all of the accounts on the network (snapshot of everyone’s balances). Servers staying in sync with each other using method known as consensus Gateways: entities that connect to the Stellar network. Entities that can accept deposits and record them into the network or issue credits to users to a particular account. Similar to what websites are to the internet: the internet is the core and websites are built on top of it as ways to interact with the internet. Anyone can be a gateway, but if interacting with money you should be a licensed organization. This is how stellar lets incompatible organizations interact in an efficient manner Users and services (developed at the local level): alex wants to send 5 lbs to sister in Nigeria (small remittance amount). Alex goes to remittance company (connected to steallar). Remittance company can transfer that money to the network (cross-border and cross-currency). Inside of stellar, internal p2p currency exchange where world’s transactions are available to everyone else. The network looks for the best rate and trades the pounds to nira (flatter marketplace, more efficient rates). Sister’s mobile money provider can receive that and then sends that to her digital wallet in 10 seconds or less. Fees don’t really exist in the network, small micro fee that is eaten by the network as an anti-spam technology cost is 1 penny will get you 300,000 transactions. Makes any currency into a digital currency because it’s what the gateways deposit into the network themselves. If recipient is not KYCed, transfer will not go through. Allows remittance company to control who gets the money. Connects 180 currencies in 2-5 seconds Any company can plug-in: mobile money, remittance, bank Open network, anyone can use it (like the internet) Potential to interact with anyone on the network http://bankinnovation.net/2016/05/deloitte-taps-blockchain-startups-to-build-new-core-banking-system/
- Blair
- Deloitte completed their Stellar integration in 4 weeks. Beta test ranges from months to years, depending on companies. Google News Best tested for two years. Considering the size of WU and security issues, I’d go with about six months including beta test.