Blockchain All Set to Revolutionize the GCC’s Remittance Market
A report by the World Bank stated that $689billion was remitted globally in 2018.
The Indian market was the highest recipient, hauling in $79billion, while China and Mexico bagged $67billion, and $36billion respectively. However, the report didn’t thoroughly explain the changing relationship between traditional send and received markets.
The chairman, and CEO of MoneyGram International, Alexander Holmes,
“Sends from countries like Romania, Guatemala and Honduras didn’t even exist four to five years ago. Romania was historically a huge receive market, but suddenly it has become one of our largest ‘send markets’ in Europe. In Latin America, Mexico, Honduras, and Guatemala were nothing, but receive markets, but now, money is moving back to the US as people who migrated there many years ago, have settled down.”
The Middle East has evolved to be a significant remittance region; Saudi Arabia is the world’s second-largest outbound market while UAE is the third-largest (in 2018, UAE’s remittances rose to 3 percent and, summed up to $46.07billion).
Grant Lines, the chief revenue officer at MoneyGram, stated while explaining the causes of the growth of the remittance market in the UAE,
“The UAE government has been very proactive in encouraging choice and convenience, as well as physical and digital access to remit money. The government has the concept of a sandbox to encourage Fintech.”
A new report from Booz Allen Hamilton, “Blockchain: Application to Financial Services in the GCC Region,” also elaborated Blockchain’s potential to revolutionize the rapidly growing remittance market in the UAE and the GCC region.
Blockchain’s potential to positively penetrate multiple industries and make the processes more efficient, orderly, secure, and transparent has been well acknowledged by the UAE government. The administration wants to establish the country as a major financial technology (fintech) player via the use of blockchain technology. Apart from educating the people regarding blockchain by conducting various blockchain conferences and event, they have already started to experiment with the usage of blockchain in the private and public sectors.
Alex Holmes, the chief executive officer of MoneyGram declared,
“The GCC will continue to outpace the mid-single-digit growth that is seen worldwide. This is a very strong region and would continue to outpace the growth.”
“Cash is still very important in our industry – our mix of cash and digital is 84 percent cash and 16 percent digital.”
However, the terrain is changing, especially in this region.
“In the GCC, digitally-initiated transactions are broadly north of 40 percent. When you’re 16 percent as a global average, but 40 percent here in the GCC, you get some idea of how fast things are changing.”
In June, MoneyGram declared, receiving a $30m investment from the blockchain company, Ripple. It also announced its partnership with Ripple to use Ripple’s xRapid platform at the backend.
The Dubai International Financial Centre would also make use of blockchain. Additionally, Dubai’s Museum of the Future announced the establishment of a research committee focused on blockchain technology. It will comprise of 32 members including, blockchain start-ups, government entities, and international companies.
GCC countries account for about $98 billion (Dh359.6 billion) yearly in outward remittance flow. Outward remittance is likely to increase, considering the rise in the number of migrant workers. However, in remittances, the complexity of the clearance and settlement chain arises, due to high transaction costs and added time. Blockchain applications could lessen this complexity by removing the need for addressee banks; hence reducing the cost for consumers and enabling ‘near-instant settlement.’ This would also give banks a new competitive edge and would allow them to levy cheaper fees.