By Neil Halligan
The rising US dollar, global expansion and yet more expats moving to the Gulf are all helping money transfer firm UAE Exchange rally momentous growth, newly appointed CEO Promoth Manghat says
It has been a boon year for UAE Exchange; one of its best, according to newly appointed CEO Promoth Manghat.
With 8,500 employees spread across 30 countries, the global money transfer firm is expecting to record double-digit growth this year — on top of the $53bn it turned over in 2014.
“It [has been] one of the best years, largely driven by some of the big projects which the UAE has undertaken, like the Midfield [Terminal] airport project in Abu Dhabi, the Dubai Canal project, and Dubai Parks,” Manghat, who took over the helm in May, says.
“The large projects are definitely seeing an uptake in the number of migrants coming into the UAE and we are seeing an increase in the volume of remittances.”
Expats sending home money, particularly from the UAE, make up a significant proportion of UAE Exchange’s revenue pool.
Remittances from Gulf countries pegged to the US dollar have surged even further — by as much as 15 percent in a month — since August, as expats take advantage of more favourable exchange rates, against weaker south Asian currencies.
“In the World Bank report on remittances, there was an interesting observation that, because of the weakening of currencies against the dollar, the World Bank estimates [there has been] slightly less growth overall in remittances globally,” Manghat says.
“But interestingly in the GCC, and specifically in the UAE, because the countries’ currencies are pegged with the dollar, we were not exposed to that kind of pattern. Because of the weakening of the currencies like the Indian rupee, or some of the other south Asian currencies, it has really helped in a surge in remittances.
“The impact was stronger during July to September, where we saw a 15 percent rise in remittances to India, the largest receiver of remittances. Meanwhile, we have experienced a spike of around 10 percent in other corridors.”
Manghat calls expats “base remitters”, because they typically send money every month, irrespective of exchange rates.
“Whether [the exchange rate] is strong or it’s weak, they have to send money each month back home because someone is waiting for the money to pay bills, or school fees. It’s for their livelihood,” he says.
Manghat describes the second set of customers as “opportunistic remitters”.
“They will definitely look at timing their remittances. When this kind of weakening happens, we definitely see an increased amount of volume in terms of activity. They send large volumes,” he says.
“They are the ones who send money for investments in other countries, or who repatriate their savings. They are larger in size, more opportunistic than the base remitters.”
A third group has emerged in the last two to three years: they leverage their earnings and send money to take advantage of a difference in interest rates, Manghat says. It is particularly common when interest rates are rising in another country, such as in India, where the central bank increased the interest rate several times between September 2013 and January 2014.
“For example, they may get a personal loan facility from the bank and they remit [the loan value]. There is such a trend happening,” Manghat says.
Apart from the company’s encouraging figures, 2015 also has been notable for an acquisition made by UAE Exchange’s owners, BR Shetty and private equity group Centurion Investments. The $1.2bn deal for global foreign currency exchange firm Travelex was announced in May last year, but was finally completed in January.
Immediately after the deal concluded, Shetty announced that Travelex would be merged with UAE Exchange and listed in Abu Dhabi by early 2017.
Manghat, who was involved in the negotiations prior to his appointment as CEO earlier this year, is more cautious, and suggests there is quite a bit of work to be done to get to a stage where the businesses could be integrated together, and possibly ready for an initial public offering (IPO).
“We are looking at different options because it could be that we bring it under one single common larger entity, rather than a potential merger,” he says. “There are two businesses spread across the globe, and there is a lot of work to be done to do that. A lot of things are in motion internally, towards bringing the businesses together and for a potential listing; the shareholders’ vision still continues to hold good.”
The integration of two entities will create an even broader global reach for the companies, Manghat says.
“From the group perspective, it’s definitely a large interest for us because between UAE Exchange and Travelex, our shareholders now have a real global platform in place,” he says.
“With UAE Exchange, we are strong in 31 countries and our strength is in the Middle East, North Africa, South Asia and Southeast Asia, and we are a category leader in terms of remittances and payments. With Travelex coming in, they are very strong in the UK, continental Europe, US, Brazil, Asia and the Pacific, and a category leader in foreign exchange.”
Travelex, with its strong brand, has over 1,500 stores across the globe, many of them in airports, which Manghat says could transform UAE Exchange’s business. “If you’re able to activate remittances capability of UAE Exchange into Travelex, that’s a big changer. How many groups will have institutions of that kind of size? Between these two brands, we’re talking about 43 countries, 2,500 branches, 1,500 ATMs, 200,000 locations, so we’re talking about a large institution,” he says.
“Secondly, we have in our platform a global footprint across the globe, and we could do more with it, [particularly] if you can digitise the experience. And in the Travelex world, that is something that is happening substantially right now.”
UAE Exchange has launched its own phone apps to some of the markets it operates in, including the US and Canada, where the business is mainly online. More recently, new apps were launched in Qatar and Kuwait, but regulatory approval still needs to be obtained for the UAE, which Manghat hopes will happen next year.
“We are working closely with the regulator in the UAE market to launch the services that we are doing [elsewhere]; how can we do it out of the branch - mobile apps, online world, or even through kiosks,” he says.
“What we want to bring in is whatever service and experience you get in the branch to be ported to the apps, including payment regulation. A customer shouldn’t have to order online and then go to a branch to make payment.”
Manghat says there has been quite a bit of experimentation with technology for the last two years, particularly on how UAE Exchange can digitise its experiences.
“We have Flash Remit, [a product that provides] instant real time credit to bank accounts. We are working with 35 banks at this moment in time. For a market like India, with the State Bank of India, the largest bank with 25,000 branches, we are able to credit the account of any customer in real time, online — even Sunday at 8pm when the banks are closed — we are able to credit customer’s money here,” he says.
Banks provide the biggest challenge for UAE Exchange, according to Manghat, with an industry-wide insistence that customers and receivers have bank accounts in order to counteract money-laundering, rather than recognising what each individual company has put in place.
He says by imposing those measures, it can force people to seek other methods of transferring money.
“It’s not helpful because this industry moves money formally and facilitates socio-economic considerations. If these industry players get displaced you have higher chance that whatever is happening in a formal way can get pushed into an informal way. It is the responsibility of the industry players like us as well to make sure that we are on the right side of the regulation, and we follow the right path,” he says.
“So the industry and the banking community has to go hand in hand. It’s important that we continue to invest in terms of technology, time, effort, money and the right processes, so that the banks get comfortable in what it does in terms of the risk approach and the compliance policy frameworks and making sure that the banks, rather than taking the whole industry, look at [individual] institutions.”
Manghat says UAE Exchange has invested heavily in compliance technology, signing a deal with a US firm in September this year that will help provide real-time alerts for money laundering and fraud.
“We have brought in the best in the industry for technology solutions for compliance in NICE Actimize,” he says.
“It’s important to show you have the right processes and to give comfort to the banks but we want the banks to look at it [too].”
Manghat also wants to see further growth in the company’s prepaid cards programmes in the UAE.
“One is on the payroll, which is NWPS, under the brand Smartpay, and GoCash — a multi-currency prepaid travel card where the customer has the option to select from around 20 currencies, choose six currencies and use [all of them] on the one card,” he says.
The GoCash card, in particular, has proven popular.
“We don’t want to bring in technology or digital for the sake of it. We just want to make sure that it does not demand substantial consumer behavioural change.”
Manghat sees Asia as a big market for UAE Exchange’s future growth, particularly Malaysia, where there is a branch model. “It’s a growing market. It’s doing exceptionally well for us.”
Africa also offers a lot of opportunities for the company.
“We are currently operating in eight [African] countries, since 2004. We are growing exponentially well in Africa,” he says.
The Gulf countries — except Saudi Arabia where it is unable to get a licence — are all performing well, particularly Qatar where the construction boom continues.
The UAE will continue to be the major market for the company, however, and that has helped spur it on to growth figures of 8 to 10 percent this year compared to 2014, with a strong finish expected to give UAE Exchange some healthy figures into the New Year.
“The last quarter of the year is one of the best in terms of festivals and activities. It’s always one of the busiest quarters,” he says.
With the integration with Travelex and more innovative products in the pipeline, 2016 appears to present another windfall year for UAE Exchange and it shareholders.
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Numbers can be manipulated. What is your real performance????