INTERNATIONAL. Migration is booming and so is the money-transfer market. In this interview Jean Claude Farah, Regional Vice President for Middle East, Pakistan & Afghanistan for Western Union explains how his company has developed a marketing strategy for ethnic consumers.
The remittance industry, which enables immigrants to send money back home to their country of origin, is a booming market. It is worth an estimated US$290 billion globally, with a growth rate of 8% year-on-year. The explosion in this sector is closely linked to the increase in economic migration, as more people across the world move away from their birth countries in pursuit of work and a better quality of life, and send money home to their families.
Western Union introduced the first electronic money-transfer service more than 150 years ago in 1871, but ventured outside the US market just over 20 years ago. It has experienced the rise of worldwide migration first-hand through the growth of its business to more than 200 countries. The customer base predominantly consists of economic migrants who wish to use money-transfer services to send money back home.
To reach these ethnic communities, Western Union has to work around the many complexities of its customer base and dig deep into the many segments or ‘corridors’ of the market.
Speed, reliability, convenience and trust are key attributes that are the foundation of the Western Union brand. The company understands that when consumers use its services, it's about much more than sending or receiving money. It's about making a connection with a loved one. Indeed its yellow and black branding could rightly be described as the ‘Coca-Cola’ or the generic identity of the whole money transfer market.
A recently-announced brand structure is helping to communicate that understanding of the customer, and it also offers the group greater flexibility to showcase its array of bill payment and prepaid services and the many choices of service delivery that will include electronic payments over the mobile phone later this year.
Globally, the Western Union brand is at different stages of recognition and development, and out of all the markets where it is present, the wider Middle East region is probably the most complex and the most promising for development.
BI-ME: The association that was announced with Bank Al Bilad for Saudi Arabia, what is your experience of that? Is it bringing Western Union to new customer groups?
JCF: The regional partnership that you mention, with the Injaz Money Exchange Company, has been created through the merger of eight foreign exchange houses in Saudi Arabia. They have the best branches and they are well located in the hustle and bustle of all the Saudi cities. The result is that the ramp up of our services in Saudi Arabia is the fastest across the whole Western Union world.
Also I should say that Saudi Arabia is the second-largest remittance market in the world, with its 7 million expats making up 30% to 33% of the population, including many South Asians. The Saudi market is worth an estimated US$17.5 billion compared to the US$35.0 billion of the US market, which of course has a much larger population and it is a different market. In the Gulf we also have to service Southeast Asians, Filipinos and Malaysians, so the spectrum is very wide and we have to deal with 15 to 20 meaningful communities.
Considering the high volume of remittances from Saudi Arabia, the Injaz company was formed to serve the 1.4 million Indian expats in the Kingdom, besides other nationalities, whose usual mode of money transfer was either done though demand drafts or through hawala, by introducing the Western Union service in the Kingdom. Demand drafts may be relatively less expensive but the time-consuming factor is increasingly important in this era where every minute counts.
BI-ME: Are there any other regional partnerships that are important to mention?
JCF: To explain the background to the market, there two ways that customers connect with remittance services, through our desks at an exchange house like Al Ansari or UAE Exchange or by a bank going into remittances and creating a remittance arm as a separate network.
Traditionally the banks didn’t like immigrants to go into those locations and so there is ANB [Arab National Bank] that doesn’t remit out of its branches, only by telephony, through its Telemoney service and by ATMs. We are also partnered with SAMBA in Saudi Arabia for SpeedCash and we have the same partnership for Bank Al Bilad and the Injaz network.
So our partners attend to the two main parameters affecting our market, the locations and targeting the ethnicities. Our goal is not to produce a generic product, without flavour or meaning for the consumer. We should remember that the Middle East is still an emerging region for Western Union.
Like the Bank Al Bilad partnership we expect to announce something soon for Qatar, in terms of the clustering, the excellent locations, and with the government behind. One reason for this consolidation in these countries is to get more control, because of the anti-terrorism and anti-money laundering legislation that is being introduced.
BI-ME: The remittances market is notoriously competitive I am sure it is fair to say. How to customers rate the different requirements of speed, security and exchange rate/charges? Which ones are more important for different types of customers?
JCF: Certainly the remittance market is one of the most competitive you will find. The demand is there but we need to be sure what we are offering. These days to be close to the customer is not good enough. It is being driven totally by the customers and they direct the trends in the market.
Especially in a market like the Gulf, you see opportunities opening up for different countries, but the trends are not set in stone. You need to have your pulse on the market.
In relation to the second part of the question, speed and security come under one banner in our way of thinking, which is peace of mind. Any customer prefers to send money fast, or very fast and direct, so that they know the money is there. But there are some ethnic differences and the exchange rate and charges are extremely important in some cases.
Many customers are very sensitive and they follow exactly how many Rupees will be received at the other side. We started a strategy of ‘corridor pricing’ that did help us to get a fair size of market share in the Gulf. In general I would say that South Asians and expats from the Arab world are more price sensitive, whereas Europeans will be looking more at convenience as well as security and speed.
BI-ME: Is there any research you can share with us, or can you quote any statistics about how fast remittances are growing around the world, and in the Middle East?
JCF: In 2006 US$290 billion was transferred around the world with a growth rate at around 8%.
BI-ME: How much money was sent from the Middle East? Are there any recent statistics?
JCF: In the Middle East remittances totalled US$59 billion in 2006 and we are expecting the 2007 statistics shortly. There are 190 million people here who are not living in their own country and there are other developments on the political side that will become an engine for even further economic improvement.
BI-ME: As the market leader Western Union is in a good position to see all the different market segments and to see the trends. In relation to this, how much do the banks and post offices come into your market?
JCF: We view the banks and post offices as our partners, especially if we look at our agent space. To name a few, we are working with Pakistan Post, India Post and we have the same relationships in the Emirates, Lebanon and Jordan. They are our partners foremost, and the banks even more so.
In the psyche of the consumer, remittances are more of a foreign exchange house product. In the region here this is strongly embedded in the customer mindset. But yes, the banks are starting to evaluate the real value of the remittance market whereas previously they preferred people opening accounts, where they made more money.
For example ICICI Bank is good in remittances and global players such as Citibank and others have tried many times. Everybody wants a share of this lucrative market. The local players in the ‘receiving’ regions have realised it way before. They know it is something they need to offer.
BI-ME: Would you say that charges have been coming down? What are the pressures driving this?
JCF: Yes charges are coming down. This is the voice of the consumer and it is one of the things that we listen to with great concern. I would also say that it is not just about dropping charges, but it’s more about offering the right value proposition.
BI-ME: Regarding Internet banking and about how more people in emerging markets are getting bank accounts, it seems to be constantly in the news. How does the company respond to these challenges?
JCF: Internet banking presents challenges and by being banked or unbanked does make a difference to how customers use remittance services and how we approach them. Internet banking is becoming trendy.
BI-ME: What are the other technology trends you are seeing?
JCF: We are working to make sure we are a part of this electronic money transfer business. Western Union has a mobile money transfer project ongoing over GSMA and we will come up with specific products by the third quarter of this year. This will be for small amounts initially and for the customer that demands a very, very convenient service. There are technical challenges of course and rules and regulations to respect in relation to many different countries.
In the Middle East we will be launching mobile remittances in over two corridors and there are many mobile operators involved in the project. We will have a lot more to say about mobile money transfer going forward.
BI-ME: Does Western Union track different migrant movements and different consumer groups (of which of course in Dubai there are many)?
JCF: Especially in relation to pricing there is a complex matrix that we have to constantly study. Take for example money transfer pricing from the UAE to Ireland, we need to be aware at any given time what’s going on with migration and in particular the ‘sending’ countries. We do know if the visas are stopped for a particular country or opened for another. Right now many countries are opening to Vietnamese whereas they were previously unknown in the remittance market. For example in Saudi Arabia there were recently 60,000 visas granted for Vietnamese, whereas previously there was only Thais and Chinese in the market from that part of the world.
BI-ME: Can you give any other insights into this or examples?
JCF: These migration trends mean that we also need to strengthen our operations on the receiving side and we need to tailor-make our marketing activities to these new groups. We have to work in their own languages as well as making sure that the offering is the right value proposition. For this we go into the training side, the marketing collateral and we try to make it hassle free for the customer, without forms.
BI-ME: How important is it to be able to track your customers and to track where is the demand in different countries?
JCF: To support these new customer groups there are a lot of things that we need to put in place in the branches and the service. It is an ongoing process and it is not close to an end. It is one of the pillars of our business, with the convenience and the ability to be everywhere in the market.
BI-ME: Are there any plans for new branches, new service packages in the UAE or in any other Middle East market?
JCF: We expand whenever we have the opportunity to expand our network and we are going to do so. In fact we have a team that is focussed on only that. I mentioned the mobile money transfer service, and in each ‘corridor’ that will have a different service package, with the different regulations that apply. The receiving country plays a major role in that.
BI-ME: Finally please comment on Western Union’s different services that are evolving and the brand identity.
JCF: We are a 156 year old brand that went international only in the last 25 years. We go to deep levels of awareness and we measure this amongst many different nationalities.
We go to a very detailed level in our research and we have 95% brand awareness across the countries that matter. Western Union is more of a ‘Coca-Cola’ branding rather than a bank. By that I mean it is for mass consumption, it is not just for a few, and we try to be present everywhere. To achieve this you need to do grassroots events for the communities, you need to go to the customer and talk to many categories to build the brand. You need to communicate to them in their own language.
BI-ME: How is Western Union reinforcing its brand in the Middle East?
JCF: The range of our marketing is very, very wide and this could be with balloons, point of sale, outdoor advertising, whether in Russian or Tagalog or Hindi, or sponsorship of sports events. It is with this mass marketing that we get close to the customer, not only below the line.
We say that are an ethic marketing company and in our region we are organising two to three community events every week. For example, we recently flew in a singer from India and supported bowling or volleyball events for Filipinos in Bahrain. This is sliced and diced according to the size of each community.
In our organisation chart we have created diaspora managers for each ethnicity such as Gulf to India or Gulf to Phillipines. These are the guys that make the breakthrough with the communities.
Western Union is now present in more than 200 countries, but I would like to conclude by saying that this is not just about flag planting. More recently we are moving in a slower fashion, which is much more about understanding the customer.