As lockdowns within countries in Southeast Asia concentrated remittances into more formal avenues, developers and consumers alike are increasingly seeking the most contemporary channels through which to move their money.
What’s more, many are seeking to leverage the benefits of digital currencies in achieving cross-border payments. A key example of this could be drawn from the recent partnership between US crypto and blockchain giant Ripple and international cross-border payments provider Tranglo, of which Ripple has recently agreed to acquire a 40% stake.
As Ripple continues to broaden its global reach, interest in the likes of Tranglo comes as little surprise. The payments provider controls a considerable proportion of the market share within the APAC region, facilitating over 1,300 banks and wallets, and 130,000 cashpoints.
The partnership could be viewed as a very synergetic natural formation between the two parties and will garner the most contemporary solutions for cross-border payments. Tranglo customers will now be able to integrate with Ripple’s global financial network RippleNet and benefit from RippleNet’s On-Demand Liquidity (ODL) service, which uses the digital asset XRP.
XRP is a digital asset native to the XRP Ledger, an open-source, permissionless and decentralised blockchain technology that can settle transactions in 3-5 seconds. In this way, the burdensome transaction processes of traditional remittance services have been eliminated.
The ODL service, meanwhile, is all about zero pre-funding, meaning that customers don’t require considerable starting capital to utilise the payout service. This means businesses can enter the payments market quickly and start transacting, saving time and money.
Fast and seamless integration
As a result of the partnership, Tranglo’s payment network – Tranglo Connect – is able to integrate customers with RippleNet and ODL, and pushes better fund and FX management.
Tranglo Connect is the company’s proprietary cross-border payments network. It removes the complexities involved in meeting international regulatory and compliance challenges, such as regional money laws and customer screening requirements. Operational costs benefit too, as the product also manages the backend processes, accommodating its own in-house compliance team and support centre.
This sophisticated use of digital currencies within remittance services holds a promising amount of potential for consumers all over the world. It will provide recipients with a higher level of working capital, a possible lack of which being voiced as a major concern by the World Bank in their previous predictions of the state of remittance services in the APAC region. In addition to this, the use of digital currencies in this way provides a better level of Forex (FX) hedging, which protects currency pairs from the risk of losses and unwanted fluctuations in foreign exchange rates. Given Ripple’s current market share, it’s also predicted that the partnership will facilitate a higher level of remittance between SEA and European markets; opening out even more potential for global remittance capabilities.
Improving payments for businesses and people
Jacky Lee is the group CEO of Tranglo and has a strong foundation in finance, audit and accounting. He honed his skills with various leading accounting firms like KPMG and BDO.
He joined Tranglo as a consultant in January 2016. As CEO of Tranglo, he formulates strategic goals, policies and plans to effect over $3 billion in transaction value a year. Jacky holds a Bachelor of Commerce, Accounting and Finance. He is a member of CPA Australia and a chartered accountant under the Malaysia Institute of Accountants.
On overcoming the challenges that Tranglo and Ripple face, he said, “Tranglo is always working on improving the way people and businesses make payments. Our system is now processing reliable payments that are faster, cheaper and more secure. But the launch of this new product in partnership with Ripple will transform the industry even further through On-Demand Liquidity.
“Improved liquidity is a major step forward, and a marked advantage of blockchain and digital currency.”
Why Southeast Asia is an ideal market for remittance
As the use of financial technology continues to dominate the industry on a global scale, those at the forefront of the sector have witnessed dramatic changes to how consumers are handling their money. Digital advancements have cultivated a level of public expectation that the provision of financial services should be delivered instantly and with as little bureaucracy associated with the process as possible.
The Southeast Asia region is particularly prominent in this regard. As seen in the recently published data of ACI Worldwide and YouGov, almost a third (30%) of consumers in Southeast Asia have reduced their usage of traditional payment methods, such as cash, credit cards and debit cards, since the onset of the global pandemic. As a result, over half (53%) are now using real-time payments more frequently than they were prior to the pandemic. This is a real-world example of where change has been directed by necessity.
Keeping pace with this level of necessity is where many financial institutions operating within the region have learnt to fly or fall. Traditional cross-border payment services are notoriously bound up in red tape, and typically involve central intermediaries to manage and process payments. Despite this, it appears that the remittance flows to the region have remained strong.
In the darkness of the pandemic, it was previously thought that migrant remittances into the region would fall. Despite the early predictions from the World Bank (WB) that a 20% decline in global remittance levels and 13% fall in APAC specifically were to be expected, these predictions never actually materialised.
This is suggested by a recently updated report released by the IOM Regional Office for Asia and the Pacific (ROAP) and ROAP’S Regional Data Hub, which found that although remittances did fall slightly between 2019 and 2020, they did not drop as drastically as expected. For example, despite the predicted 4% decline from the WB, Nepal’s total remittance inflows experienced only a 2.5% fall during this period. Similarly, despite the Filipino Central Bangko Sentral ng Pilipinas’ (BSP) forecast of a 5% decrease, remittances in The Philippines experienced a mere 0.8% fall.
This unforeseen stability has largely been the result of a shift in remittance trends. As families have been kept apart internationally, many have been restricted to the use of formal remittance channels amid the Covid-19 lockdowns.
Within this atmosphere, developers and consumers alike are seeking improved and more efficient ways to transfer their money digitally.