What is the future of remittances?

As a leader in a global industry that increasingly relies on digital platforms, I am often asked what the future of the remittance sector will look like in five years. Or even 10 years.

As long as cash continues to matter – and it will for the foreseeable future – my prediction is that there will still be a need for bricks-and-mortar money exchange centres.

The UAE is a crucial hub for money services and was the second-biggest source of global remittances in 2020, behind only the United States. Remittances by foreign workers in the UAE totalled $43 billion last year, according to data from the World Bank. It’s safe to estimate this trend will not decrease any time soon.

Since my grandfather established Al Fardan Exchange in 1971, physical spaces for those who need to remit or exchange money have proved invaluable. It has shaped this family business during our five decades in operation.

While digital remittances continue to grow in importance, my view is that cash-based transactions will remain resilient in the short to medium-term.

So, while we have no plans yet to completely migrate our business to digital platforms, this does not mean we are not adapting to changing market dynamics. Our goal has been to deliver an omni-channel strategy to drive our organisation’s growth and development.

How does that translate in practical terms? Like many exchange houses in the 21st century, Al Fardan Exchange is in the middle of a digital transformation. From a talent perspective, we are hiring a digital-first team and looking to enlist corridor-focused talent in the future, as well as add new functions and product owners to our core business.

FinTech is another important factor that will drive our future revenues. While it is disrupting the payments space, unlike other businesses that are resisting change, we are embracing FinTech and evolving our offering to meet new industry dynamics. On the one hand, we are competing with FinTech players and on the other we are collaborating with them via strategic agreements.

Recently, we partnered with an innovative payment ecosystem that has been designed and developed within the UAE’s Smart Government programme framework. The Dubai-based app offers contactless payment and instant credit. After fulfilling the one-time "know your customer" norms as stipulated by the Central Bank of the UAE, users can immediately transfer money to their beneficiaries, either to a bank account or as instant cash.

This is a perfect example of leveraging partnerships to open another channel to extend our services to a wider audience in the UAE and to offer more flexibility to customers. Such tie-ups will be key for our business evolution and expansion.

Besides providing our services to partners, we will also continue to tie up with companies that offer inroads into new customer segments.

In June, we signed a deal with a Dubai-based FinTech start-up that will see our global processing and clearing capabilities allied with their digital technology. The move will amplify both partners’ abilities to serve migrant workers who are in desperate need of no-fee accounts and low or no-cost cross-border transfers.

The partnership also furthers our corporate social responsibility agenda to drive financial inclusion by allowing overseas workers to remit money home easily.

Most importantly, the agreement unlocks a better experience for a significant customer segment – millennials and Gen Z – that demands instant money transfer services. In response to this demand, users will now be able to send remittances to multiple global destinations in-app, with low fees and preferential FX rates, along with a seamless experience.

It will be these kind of hybrid evolutions in our product and service offering that drive future success.

While we have plans to expand our physical footprint in the region with exchanges in new territories, we have to ensure we service a broad customer base in the most efficient manner possible.

That will necessitate embracing virtual technologies to complement our real-world innovations as we position our institution for the next 50 years.