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Cross Border Remittances to India - Trends and Outlook. ICICI Bank Limited, India October 10, 2014. About ICICI Bank Limited. Second largest bank & Largest Private sector bank in India basis total assets (over USD 99 Bn*). Diversified financial services franchise in India.
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Cross Border Remittances to India- Trends and Outlook ICICI Bank Limited, India October 10, 2014
About ICICI Bank Limited Second largest bank & Largest Private sector bank in India basis total assets (over USD 99 Bn*) Diversified financial services franchise in India Insurance – Life/General (JV with Prudential / Lombard) Largest private sector insurer Asset Management (JV with Prudential) Amongst top three Mutual funds** Private Equity (Wholly owned) Leading Private Equity company Investment Banking & Broking (Wholly owned) Leading Broking company Over 3800 branches and 11000 ATMs in India Global presence in across 18 countries * As of March 31, 2014 **Basis average AUM
Agenda Global Remittance Market Indian Remittance Solutions Malaysia
Agenda Global Remittance Market Indian Remittance Solutions Malaysia
Global remittances are on a growth path backed by steady migrant flows Over 200 Mn people estimated to be international migrants Informal flows 0.5 x Inflows to developing countries constitute over 75% Source: World Bank – Migration and Development
Asia accounts for over 60% of the remittance flows into developing countries Destination of migrants from Asian countries* Over 50% migrants from Asia or 60 Mn are in high income countries Source: World Bank – Migration and Remittance Factbook
Remittances have time and again proved to be resilient during global crisis Constituents of Personal remittances • Personal transfers to non-resident households • Net compensation of employees • Capital transfers between households • Family Maintenance – towards regular expenses • Insurance - for well being of the family • Investments in home country Main motives of Remittances Impact of Remittances on home country • Reduction in poverty • Enhanced levels of literacy and health expenses • Insurance against crisis/disasters Remittance flows into developing countries estimated at over 3 times that of official developmental aid Source: World Bank – Migration and Development
Agenda Global Remittance Market Indian Remittance Solutions Malaysia
India is the largest remittance receiving country in the world • Top origination regions • North America , Middle East, Europe, South Asia • Remittance flows form 3.7% share of India’s GDP * Source World Bank – Migration and Development brief
Enabling regulatory framework has largely led to a bank-led market UK and Europe 12.2% North America 34.3% GCC 36.9% Africa 2.9% East Asia 6.7% South America 2.6% Others 4.3% Source of Origination * Source RBI Bulletin 2013
Migration patterns have exhibited increasing complexity and diversity Multi corridor – multi-segment pattern Migration of knowledge workers Migration of manual laborers Challenge was to create an economically viable business model that straddles the diverse customer segments
Typical challenges migrants have faced Send Side (Origination) Limited servicing of Migrant population by local banks • KYC norms restrictive for migrants • Standard banking services tend to be expensive • New Acquisition not focused towards the growing migrants Receive Side (India) • Limited penetration of banking services with penetration being predominantly urban • Limited clearing network in upcountry locations • Lack of Hybrid solutions for bottom of pyramid • Prohibitive tax laws • Usage of high-cost cash-to-cash channels offered by Money Transfer Operators (MTOs) • Usage of unofficial channels – estimated to be 50% of official flows
Evolution of Remittances Mobile Online Conventional • Need for faster and economical modes of transfer • Technology – Key Driver for innovation
ICICI Bank’s foray at the start of the decade with a Customer Centric Product Cycle Voice of Customer Payment Infrastructure Future Trends Global & Local Partnerships Service Delivery Infrastructure Technology Infrastructure ICICI Bank has been a significant player in the India Inward Remittance market
Customer feedback has played a central role in defining the remittance product strategy… • “There are very few Indian banks in this country to take care of my India banking and money transfer needs” • “Sometimes it takes more than 3 weeks for the money to reach my family” • “I need to travel to an agent outlet every time I have to send money, its very inconvenient” • “I never know where my money is at any point in time. Once the money is sent its like a black hole” • “The transfer fees are too high. A large part of my savings actually go into paying transfer fees to send the money home”
….with leveraging of technology for product innovation & lowering costs Identified Need Gaps Product Innovation • Online transfers through ACH with transaction tracking • Low-cost • Credits within 4 to 24 hours • Tedious documentation • Need to visit bank/agent • High Charges • Uncertain fulfillment US • Inconvenient (No account transfer option) • High fulfillment time frame - posting of checks to India • Launch of ‘Credit to account’ two hour remittances • Instant transfers through host-to-host integration GCC • Centralized processing linked to all payment systems in India • Proprietary online remittance platform – direct to customers • Proprietary transaction capturing & delivery platform – for partners • Significant automation leading to low costs and STP rate of 99% Leveraging Technology
Offline Solution catering to semi-skilled • Low literacy, prefer walk-in channels, under banked • Construction/Contract workers, drivers, maids etc. Partnerships with over 230 correspondent banks & exchange houses across 40 countries worldwide Available across 40 countries worldwide Simple, low-cost with direct bank A/c credits • Instant transfers via host-to-host system integration • Popular with knowledge workers where limited electronic clearing
Online Solution catering to knowledge workers • Educated, Internet savvy, urban and banked • Salaried / Self employed in professional field Available across 10 key regions Safe, Simple, Convenient, Low-cost • High adoption rate - constitutes 15-20% of inflows into India • Popularity triggering usage by semi-skilled migrants
Mobile Access Channels Go Mobile Go Social • Over 6.8 Billion mobile worldwide • 698 Mn smartphones worldwide • 900 mn mobile user base in India • Over 1.8 Billion active users monthly on facebook** ICICI Bank’s Money2India Mobile App NRI Services page with over 28,000 likes • Full desktop service even through app • User should be able to do remittance without getting out of facebook * wwww.mobithinking.com ** www.investor.fb.com
Agenda Global Remittance Market Indian Remittance Solutions Malaysia
Shift in migration pattern from India Significant increase in flows from GCC, East Asia & Australasia* Malaysia emerging as a fast growing corridor in East Asia * Source RBI Bulletin 2013
Malaysia - Emerging corridor • Malaysia is emerging as a gateway to ASEAN region • For the year 2013 the GDP was USD 303.5 Bn at 4.7% growth, however BNM expects the growth for 2014 to be in the range of 4.7% to 5.5%* • Malaysia is moving from agriculture and primary commodities to manufacturing, export driven, knowledge-based and capital-intensive industries • Malaysia is the third best destination in the world for outsourcing activities** • Malaysia is emerging as an attractive investment destination for Indian corporates • Migrant pattern changing towards white collared with more Indian corporates in Malaysia – Reliance, L&T, Avantha, Manipal, Biocon * Sources: www.matrade.gov.my, www.BNM.gov.my ** A.T. Kearney’s 2009 Global Services Location Index (GLSI)
Malaysia to India – Remittance Market NRI Diaspora • Malaysia has over 2 mn Persons of Indian origin (7% of the population) and 0.15 mn growing population of NRIs • Diverse NRI population mix of white and blue collared segment • Malaysia is between the conventional and online phase of remittances • Estimated market USD 800 mn growing over 10% • Predominantly bank led market similar to India Remittance Market • Limited online options remittances for white collared remitters • Banks do not offer online remittances for non customers • Physical presence in Malaysia required for offering remittances services by Indian banks Challenges
Enabling trends in remittances Clearing mechanisms • Pull based / auto debit clearing mechanisms lead to convenient online remittance solutions • ACH (Automated Clearing House) in USA and Canada • Instant clearing between local banks • IMPS, RTGS, SEPA • WPS schemes help to bring the migrant wages to banking channel reducing informal flows • Major GCC markets like UAE and Saudi Arabia have moved to WPS WPS – Wage Protection System Easy capital requirement • Lesser capital requirement increases players bringing down the cost of remittance transfers • Certain US states have recently reduced capital for money transmitter license to 0.25 USD mn from 0.5 USD mn earlier Leveraging technology • Enabling new channels to increase access to migrants • Remittance Kiosks in migrant areas / colonies • Disbursement through ATMs • Mobile remittance – Barclays “Pingit”