Tag: money transfer

Sending money home – the difficulties faced by the UAE’s migrant workers

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A large part of life for many migrant workers in the UAE is sending money home. Most are here because they can earn substantially more than they can in their native countries, coupled with this is the fact that a lot of expatriates are supporting families at home.

Sending funds from one country to another might seem simple in these days of online transfers however, many workers in the UAE are paid on prepaid payroll cards, which they can only use to withdraw cash from an ATM, and their wages are lower than the AED 5000 required by banks to access even a basic account.

If you don’t have access to online banking, or any banking at all, the only option left is cash transfers. This is something NOW Money is solving by allowing low-income workers to access the same advantageous transfer rates as those in the banking system via a payments app. For now however, cash remains king for this section of the population.

An expatriate sending money home needs to consider these main three factors:

  • Which is the fastest way to send money?
  • Which exchange house has the best exchange rates?
  • What, if any, are the “hidden fees”?

Obviously, working out all of the above and choosing where to make your transfer takes time and resources. A worker who only has one day off a week will almost certainly not have the time to research the best options every month which potentially leaves them worse off.

Cash transfers fall into three main areas; Cash to cash, cash to bank and cash to card. All of these require an exchange house to carry out the transaction. Users can either use a standard exchange house Al Ansari Exchange or UAE Exchange or an express exchange house such as Western Union.

Standard exchange houses are generally cheaper in terms of transaction fees than express ones but the downside is they are slower in sending funds across borders. Express houses can have the money sent over in a matter of minutes but inevitably, the fees are higher for this service.

Exchange rates marginally differ from one exchange house to another however, although there may not be huge differences, over time migrant workers can save a chunk of their income if they find and transfer their money from the right exchange houses at the right time.

It may be a little difficult to compare rates across these houses, as rates change constantly, on average more than 5 times a day, so pinpointing the optimum time to make the transfer is complex.  Technology is changing this and there are websites that compare rates at different exchange houses. Get4x.com for example give up to the minute rates across the different exchange houses and the best location to use.

Surprisingly, exchange rates differ depending on the location of the exchange house’s branch. On average, rates are more competitive in Sharjah for example than in the malls of Dubai however they may not be as accessible.

Another consideration for those making the transfers are the charges or the “hidden fees”. Many exchange houses across the UAE are known for implementing indirect costs which the consumer is not always aware off, essentially withholding some of the money at the time of pickup at their foreign branches.

Sending money home to loved ones comes with many headaches at present for low-income workers. NOW Money plans to change this by giving those previously excluded from the banking sector access to online accounts and payments facilities. The service will provide the best exchange rates available with the in-app marketplace, and it will also give an update on when the money is due to arrive back home. The best part of all is that the transfers can all be done with a few clicks on a screen in an internet connection. NOW Money aims to help people receive the same access to services that those in higher income roles take for granted. It’s time to stop financial apartheid and allow everyone the choice to bank online.

by Vivek Harjani

UAE-Based Fintech Start-Up Secures $700K Investment to Advance Financial Services Access for Underserved Migrant Workers

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NOW Money has secured an investment of $700,000 from two U.S.-based venture capital investors – Accion Venture Lab, the seed-stage investment initiative of financial inclusion leader Accion, and Newid Capital.

Both Accion Venture Lab and Newid Capital make investments that target the financially underserved.  Venture Lab invests capital in, and provides support to, innovative fintech start-ups that increase access to, improve the quality of, or reduce the cost of financial services for the underserved at scale. Newid Capital focuses on such investments outside of North America and Western Europe.

NOW Money uses mobile banking technology to provide accounts, financial inclusion and a range of low-cost remittance options to low-income migrant workers in the Gulf region. It aims to provide access to affordable financial services for everyone.

The investment comes a year after NOW Money’s initial seed funding, which allowed the company to expand the team and develop the technology and brand. With the latest investment, also a part of its seed round, the team plans to launch the service across the United Arab Emirates and expand into the other Gulf Cooperation Council (GCC) countries.

Co-founder of NOW Money, Ian Dillon said, “Having what’s understood to be the first early stage investment from U.S. venture capital into the Middle East is testament to the opportunities available here and how far the GCC has come in making itself a destination for investment. We hope this will be the first of many U.S. venture capital investments in the region, and will help to grow the ecosystem further.”

“We’re excited to be making such a big social impact in the region. Accion is one of the leading global institutions promoting financial inclusion, and Newid Capital was co-founded by Nigel Morris, who previously co-founded Capital One Financial Services. We’re excited to be working with them to bring financial inclusion to the 26 million unbanked in the GCC,” he added.

“Each year, migrant workers contribute more than $400 billion to their home economies, and the United Arab Emiratesis among the top remittance-sending countries in the world,” said Michael Schlein, CEO and President of Accion. “NOW Money’s innovative approach and digital platform provide a faster and safer option for these workers to support their families and communities.”

“Our partnership with NOW Money marks a number of firsts for Accion Venture Lab – our first investment in the Middle East region, our first investment into a wholly-digital neobank, and our first opportunity to focus on reaching low-income migrant workers,” added Amee Parbhoo, Director of Investments at Accion Venture Lab. “As we reach this new group of financially underserved individuals, we’ll look to apply our learnings to Venture Lab’s work around the world.”

In the last 12 months, NOW Money has won six awards, including Chivas’ “The Venture” for the Gulf region. The co-founders Katharine Budd and Ian Dillon speak regularly at fintech events, such as Payfort and Wamda’s State of Fintech report, and are featured regularly in publications such as Entrepreneur Middle East and on the Dubai Eye radio station.

About NOW Money

NOW uses mobile banking technology to provide accounts, financial inclusion and a range of low-cost remittance options to low-income migrant workers in the Gulf Cooperation Council (GCC) countries, improving their lives and saving them and their families significant money, in a profitable and sustainable manner.

About Accion Venture Lab

Accion Venture Lab is the world’s leading seed-stage investor in fintech for the underserved. Venture Lab invests capital in, and provides support to, innovative fintech start-ups that increase access to, improve the quality of, or reduce the cost of financial services for the underserved at scale. Since launching in 2012, Venture Lab has deployed over US$10 millionacross more than 25 start-ups that work in over 20 countries worldwide. Venture Lab is a part of Accion, a global non-profit committed to creating a financially inclusive world, with a pioneering legacy in microfinance and fintech impact investing. Accion catalyzes financial service providers to deliver high-quality, affordable solutions at scale for the three billion people who are left out of – or poorly served by –  the financial sector. For more than 50 years, Accion has helped tens of millions of people through its work with more than 90 partners in 40 countries. For further information, visit https://www.accion.org/venturelab.

About Newid Capital

Newid Capital is a direct-investment fund focused on financial services and financial technology companies in developing markets. Through its investments, Newid Capital aims to expand financial services to currently underserved markets and individuals. Newid actively seeks early- and mid-stage start-ups that are looking for investment and operational assistance. Newid is able to leverage personal experience in building, and exiting, financial services companies from the viewpoint of both the entrepreneur and the investor.

Why We Invested in NOW Money

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By Amee Parbhoo, Director of Investments for Accion Venture Lab

Despite the fact that they are wealthy and modern, cities like Dubai in the Gulf Cooperation Council (GCC) actually face a big financial inclusion challenge. There are 8 million foreign-born migrant workers in the United Arab Emirates (UAE) alone, making up some 88% of that country’s total population. These workers come primarily from India, Pakistan, Bangladesh, and the Philippines, and are mostly in low-paying jobs such as construction or domestic labor. Across the Gulf region, migrants have faced tough working conditions and have been historically ignored by financial institutions. They lack access to basic financial services, including bank accounts and fast, convenient remittance channels for sending money to their families back home.

This is where NOW Money, Accion Venture Lab’s newest portfolio company, comes in. NOW Money was founded in 2015 by Katharine Budd and Ian Dillon, who were inspired by the digital-only “challenger banks” that had begun to emerge across the US and Europe. While the UAE has over 50 banks in operation, none of them are able to reach the country’s massive and underserved low-income migrant population effectively. NOW Money provides a suite of products to its customers: current accounts for depositing and withdrawing wages; debit cards for use at ATMs and for merchant transactions; and a marketplace of online remittance platforms for cheaper and more convenient money transfer services. By reducing the cost of customer acquisition and reaching a relatively untapped market, NOW is able to offer these services (and eventually others) and cost-effectively serve customers that would otherwise be considered unprofitable by traditional banks.

NOW partners and integrates with large employers to pay workers’ salaries directly into NOW Money accounts. The value proposition is strong for both end customers and employers. For customers, NOW offers a suite of products otherwise unavailable in the market. In particular, during our due diligence we saw customers incredibly excited about the digital interface for access to remittances. In the UAE today, some 95% of remittances are cash-based transactions. The workers we spoke with remit 60% or more of their wages to family members in their home countries, and typically have to take time off work, wait in long lines at remittance houses, and pay high fees in order to make these regular transactions.

Accion Venture Lab and NOW Money staffers talk to migrant worker customers about their experiences using the service.

For employers, NOW provides a less expensive solution for payroll. In addition, the employers we spoke with were motivated to give their employees the benefits NOW offers for both moral and economic reasons. Some employers see a spike in absenteeism the day after pay is disbursed, as employees go to remittance houses. Lastly, many employers, especially in more skilled and technical professions, value NOW as a way to increase employee retention.

Venture Lab is excited to be supporting the NOW Money team as they grow and scale. We invested in the company — our first in the GCC and one of the first early-stage VC deals in the region — for a number of reasons:

  • Clear social impact: The migrant population in the GCC is historically underserved by basic financial services. The wages these workers earn are low ($200–300 per month, depending on occupation). Due to banking standards in the UAE, it is very difficult and costly for a customer to open an account if they earn less than $1,300 per month, thereby excluding a vast majority of the migrant worker population.
  • Large market with unmet need: The UAE is the third largest market in the world for remittances, trailing only the US and Saudi Arabia. Across the GCC (UAE, Saudi Arabia, Bahrain, Kuwait, Qatar, and Oman), the total addressable market is some 25 million low-income migrant workers believed to be remitting about $50 billion annually. The remittance corridors used are some of the most active in the world, and NOW fills a crucial gap by providing customers ease of access and lower costs.
  • Innovative “neobank” model: Accion Venture Lab looks to support fintech companies that have innovative approaches to increasing access to and quality of financial services for underserved markets. We have been actively watching the digital-only neobank/challenger bank models around the world and are excited about NOW Money, our very first neobank investment. We’re thrilled to be part of NOW as it expands and aims to become the financial service platform of choice for migrant workers. As NOW truly owns the customer relationship, it will be able to provide incremental value to customers’ financial lives with each further partnership, beyond simply account access and low-cost remittance tools.
  • Opportunity to learn from new customers, market, and product: NOW Money would be a first for Venture Lab in a number of ways. Venture Lab has never invested in the Gulf region, and NOW Money could serve as a way to learn about this fast-growing region and its market dynamics. In addition, Venture Lab has investments reaching many kinds of underserved customers, but we have limited experience serving migrant workers, which is a huge market with demonstrated, specific, and relevant financial needs. NOW Money would help us better understand this vast and growing population of underserved customers.

As is the case for all of our seed investments, NOW Money is early in its journey, but as investors in the company and proponents of financial inclusion for underserved populations, we are excited about their progress so far and the company’s plans going forward.

Rob Stevens contributed to this article. 

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