DUBAI: Gulf banks offering expensive remittance services risk being disrupted by new entrants doing the same job for a fraction of the cost, a seminar heard on Sunday.
“We live in a region where with the exception of Saudi Arabia more than 80 percent of the population is made up of expats. These folks send $100 billion back home every year and the cost of sending that money is sometimes exorbitant — especially if you send the money from here to another emerging market,” Mohamed Damak, a senior director at S&P said during an online seminar.
Remittance flows to the Middle East and North Africa region rose by 2.3 percent to about $56 billion in 2020. But the cost of sending money to and from Gulf states varies hugely.
The World Bank estimates that the cost of sending money from high-income countries of the Organization for Economic Co-operation and Development to Lebanon remains very high, mostly in the double digits. On the other hand, sending money from GCC countries to Egypt and Jordan costs around 3 percent in some corridors, it said.
Fees, commission and foreign exchange revenues typically account for 20 percent of GCC banks revenue base — representing an attractive prize for new entrants with a better value proposition.
“A fintech that offers the same service of transferring the money from point A to point B with a fraction of the cost ... and immediately, versus a situation where you have to wait for a few days or sometimes a few weeks if you are sending to a remote emerging market — I think it will definitely have the attention of people immediately,” said Damak.
