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When a remittance player looks to expand their operations, they look at corridors with maximum potential. As we announce MoneyGram's expansion into the Philippines, we dive deep to answer what makes the Philippines an attractive market for International Money Transfer companies!
In 2018, OFWs remittances to the Philippines rose to $33.8 billion making it the fourth highest remittance receiver after India ($79 billion), China($67 billion) and Mexico ($36 billion). These inward remittances contributed to the Philippines’ GDP growth by almost 10 percent. And the remittance amount of the first 8 months of 2019 totaled to $22 billion, a 3.6 percent increase from 2018’s $21.2 billion. The bulk amount came from the US at 36.4 percent followed by Saudi Arabia, Singapore, United Arab Emirates, Japan, Canada, the UK, Hong Kong, Germany, and Qatar.
This growth is also made possible by the Philippine government’s initiatives such as financial awareness programs, observing “International Day of Family Remittances’ and also publicly appreciating their ex-pats’ financial contributions. Additionally, remittance fees to the Philippines are the lowest in the Pacific and East Asia region (averaged 3.5 percent). The low remittance fees allow ex-pats to send a substantial amount from their income earned abroad.
According to the World Bank, the global remittance market is estimated to reach $746 billion this year, at a 4.5 percent growth rate. And the majority of the remittance will go to countries like India, China, the Philippines, Mexico, and some African countries.
The coronavirus pandemic has brought the global economy on its knees, earlier growth projections are likely to be corrected. However, earlier research has shown that remittances remain resilient in the face of economic downturns. In the case of disaster and national crisis, remittances have spiked.
What is MoneyGram?
MoneyGram is an international money transfer company with headquarters in Dallas, Texas in the United States. It is one of the oldest and leading international money transfer companies in the world. It offers bill payment services in the US and Canada and as of today provides money transfer services through a global network of more than 300,000 agent locations in 200 countries and territories.
Back in 2011, MoneyGram opened its office in Manila, the company’s first in the Philippines. And today it has more than 10,000 agent locations in the country catering to the growing number of Overseas Filipino Workers (OFWs) who are sending money to their loved ones. This extensive network across the Philippines is established through partnerships with various retail outlets, financial institutions, and departmental stores such as BDO and SM Malls, and pawnshops such as Cebuana Lhuillier, M. Lhuillier Financial Services Inc, and Palawan Pawnshop. Furthermore, through MoneyGram’s cash to account service, OFWs send money directly to their loved ones’ bank accounts at any major banks in the Philippines.
MoneyGram in the Philippines
With over 10,000 MoneyGram locations in the Philippines, it is one of the largest networked remittance companies in the country. With its partnership with GCash in 2018, MoneyGram’s digital channels have further expanded in the Philippines. GCash is a unit of Globe Telecom, Inc or Globe, the largest mobile network operator in the Philippines. It provides mobile payment and remittance service under its brand name GCash.
GCash is an application that can be installed on smartphones or tablets for payment of bills, buying goods and services and sending or receiving money. GCash has revolutionized the way Filipino transact with its over 63,000 partner merchants. Alex Holmes, CEO of MoneyGram said that this collaboration with GCash aligns with their strategy to offer services that are user-friendly, rapid-response and low-fee channels to send money across borders. Now, OFWs can send money in minutes to GCash mobile wallets in the Philippines, 24/7. With the growing number of smartphone users and increased internet penetration in the Philippines, MoneyGram is pushing for financial inclusion of the unbanked and underbanked Filipino communities for them to receive money conveniently with GCash’s help.
Accelerating its digital growth, MoneyGram launched Visa Direct, in partnership with Visa in the Philippines and in Spain as well in December 2019. Visa Direct is a real-time push payments platform that allows customers to send money in real-time. MoneyGram customers can now send money to recipients’ eligible Visa-branded debit cards via the MoneyGram website or its app. It is the first company in the money transfer industry to enable cross-border transfers from the US using Visa Direct. It aims to expand its service to other countries shortly.
What to expect in 2020 in Peso Remittances?
Philippines Money Remittance Market revenue has been growing consistently over the years with a CAGR of 5.9 percent in the past years. The growth rate has been volatile due to the global economic slowdown, oil crisis, diplomatic crisis. And now with the outbreak of the novel coronavirus, the growth projections have been adjusted to 2.2 percent.
According to the Philippines Economic Update (PEU), the Philippine economy is projected to grow at 6.5 percent in 2020 and 2021 despite the global uncertainties. The remittances amount now stands at US$34.2 billion for 2020 and this shows that the market is expected to show an upward trend.
This growth will be fuelled by higher private consumption (lower inflation), a steady increase in remittances, and election spending. Moreover, the Philippine peso is expected to perform stronger in 2020, but likely to get weak in the long term. As per Fitch Solutions’ prediction, the peso is to average P51.70:$1 in 2020, stronger than an earlier projection of P53.00:$1. In the latter part of 2020, and through to 2021, owing to the Philippines’ widening current account deficit, rebounding inflation rates, and negative effects of global growth, there will be depreciation of the peso.
Remittances are a major source of the Philippines’ foreign exchange reserves which help in maintaining the balance of payments and stabilizes the value of the peso against the US dollar. The inflow of remittances to the Philippines should be able to keep the Peso elevated. Also, the December remittances, which are the highest due to the festive season, are known to ease the pressure on the Philippine peso.
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