Western Union to ‘post’ India model overseas

Western Union is keen on repeating its success of using post offices for remittances to India in other Asian markets.

Anil Kapur, managing director, South & South-East Asia, of the global remittance company said Indonesia, Sri Lanka, Malaysia and Singapore offer a great opportunity as these countries are similar to India in that most people there do not have a bank account.

“We are using the post office model even in Bangladesh, Sri Lanka, Singapore, Malaysia and Indonesia, of which Malaysia is a send country (people send money out of there),” he said.

Western Union renewed its tie-up with India Post in January this year. It also has deals with banks, non banking finance companies, microfinance partners and government bill payment service providers.

Kapur said tie-ups with banks have proved to be a win-win for both parties because banks get visibility in foreign countries and Western Union can increase its reach here.

Kapur does not consider the entry of banks in the remittance business as a threat.

He said banks usually focus on remittances from select countries like US and UK and ignore the large chunk of blue-collar workers..
“For banks, remittance is not the focus… they want customers to come to the branch so that they can cross-sell other products,” he added.

Despite increasing its number of centres to 50,000 now, from just 3,000 in 2001, Western Union said there is still an untapped market for remittances in India. “The informal channel still remits 30-50% of the total money transferred through the formal sector,” Kapur said.

Western Union moved about $67 billion of the total $400 billion that was remitted globally through the formal channel, according to a KPMG study, Kapur said. “Globally we made revenues of $5.3 billion in 2008,” he said.

Remittance fees have come down over the past two years. Remitting $1000 from Dubai costs $4 today, as against $10-15 that was charged 6-7 years ago, Kapur said.

Kapur said there has been no slowdown in remittances despite job losses in the Middle-East and the developed countries. “We usually have a robust fourth quarter (October-December) and the first quarter (January-March) is slow. Our business model is very well conducive and the slowdown and job losses haven’t impacted us,” he added. Western Union has applied to shift to the new Payments & Settlements Act 2007.

The company is also seeking removal of some restrictions on money transfer. “Restrictions like one person can receive only 12 transactions a year; each transaction shouldn’t be more than $2500; and one can’t pay in cash for amounts greater than Rs 50,000 have to be eased. Otherwise, people will opt for informal channels,” he said.