With Andria Thomas
Social networks such as Facebook and China’s RenRen reach increasingly large segments of the global population, with Facebook claiming over 1 billion active users and RenRen claiming 178 million. The popularity of social networking is not limited to developed countries, but extends to developing countries as well. In fact, in countries that receive the most international remittances, such as India (#1) and the Philippines (#3), Facebook is either the most frequently visited website or among the top three most visited. These social networks reach segments of the population who can often lag in financial inclusion: in the Philippines, more women than men access Facebook, for instance. The enormous—and deepening—reach of these social networks is clear. If money transfer organizations begin offering fund transfer services to populations traditionally excluded from financial services via social networks, they could generate significant international transaction volumes in an environment where mWallets— in most countries—have struggled.
Following up on our two blog posts from 2013 on international remittances through branchless banking, we now look at whether innovative (yet unproven) new models for international funds transfer that leverage connections with social networks might accelerate global uptake of technology-enabled remittance models.
In short, the potential is there, but there’s a lack of evidence that this model will be successful. Nevertheless, we are excited about what social networks could offer with regard to international remittances as internet access, particularly through mobile phones, continues to grow rapidly in developing countries.
For example, two existing services, Azimo and fastacash, are linking international remittances to Facebook. Azimo is an online money transfer portal that advertises itself as “the first online money transfer service to be fully integrated with Facebook.” It enables users to “send money abroad easily and quickly to [their] Facebook friends.” Two steps within the Azimo user experience run through Facebook. The person sending money can login through Facebook, and select a recipient from his or her Facebook friend list. Despite the innovative nature of this integration, the current functionality of Azimo only lightly addresses three of the main challenges to “branchless” remittance transfers: sender trust, regulatory compliance (KYC/AML) and recipient ease of use. Though the Facebook-enabled steps of the transfer process are familiar to users, they still must begin an interaction with Azimo, a new service they may not necessarily trust enough to choose over other services and channels. Azimo’s Facebook app is linked to the sender’s bank account, which is required and helps on both the trust side and the regulatory compliance side . On the other side of the transaction, recipients have a variety of options to pick up their funds: via Azimo agents, bank accounts, bill pay, air-time top up, mobile wallets and even home delivery in some markets. Azimo does not yet offer an option for funds to remain in a Facebook-supported e-Wallet.
- Fastacash takes social network integration one step further. Originally offered as a domestic service within Singapore, fastacash relaunched itself as an online money transfer service for the U.K.–Kenya corridor in October 2013. As with Azimo, senders can log in and select recipients through Facebook or other social networking sites. In addition, the transfer occurs through “fastalink,” an encrypted link that contains information about the fund transfer as well as a personalized message or photo from the sender. This customized communication element may offer consumers an added sense of trust by combining an authenticated personal message (e.g., “Dear Mom, I just sent you some funds”) with a formal notice of the transfer (e.g., “Transmission #xxx with funds of KSH 500 was successful”). While this feature may address a key barrier to international money transfers, the current incarnation of fastacash also requires recipients to have bank accounts.
Though it might be far off, the “what if” of social networks playing a role in remittances is exciting. A pilot of fastacash from last year tested a feature that would allow customers to use the funds they transferred into the Facebook-enabled eWallet without “cashing out” first—for example, to purchase products or services or transfer funds directly from the eWallet, in a fashion similar to Google Wallet in the U.S. today. Currently, fastacash does not offer this for international remittances, and regulatory concerns, particularly those guarding against money laundering, raise several substantive challenges to putting the idea into practice. However, the vision of a Facebook-enabled eWallet that offers direct connectivity to retailers and that mitigates issues of customer awareness, trust, and ease of use is worth striving for. That’s something everyone should “like.”
And if this model can be supported by evidence, it may encourage some large corporations, such as Google, VISA, and others, to drive remittances through social networks. This could be the real market game-changer.
The above post first appeared in CGAP blog.