According to the International Labor Organisation, there are more than 160m migrant workers in the world. Many of you know them as remittance customers but, especially in the low-income bracket, many migrant workers experience significant difficulties when trying to access basic financial services because they lack the necessary documents and requirements that mainstream bank need for KYC procedures.
This has spurred a new wave of products and innovation focused on solving the need for this large, underserved group.
By lowering the barriers to open a bank account, digital banks are providing a way to narrow down the financial inclusion gap of foreign-born workers. Given the importance that remittances have for migrants, most companies offer the ability to transfer money internationally, either independently or in partnership with money transfer providers such as Ria and Wise, in addition to basic current accounts and payment cards. To date, of the major remittance players, only Remitly has launched its own separate banking product.
In addition to migrant workers themselves, fintechs are also targeting companies providing jobs to migrants, such as Instapay in Malaysia. Through the service, employers can offer a digital wallet where they pay salaries and that have a card attached. Employees can use their salaries for everyday spending as well as remitting money to their families back home within the app.
If these products prove successful (and few are instant wins), expect the incumbents such as Western Union to enter this market. Western Union’s CFO told me as much in our chat last month. The challenge, though, is that banking requires a known, trusted brand and holding money for someone is very different to transferring it.