Explainer: GCC’s changing remittance market

From the impact of new technologies to currency volatility, the regional remittance market is facing several changes



How has the remittance market in the Gulf Cooperation Council (GCC) region evolved in recent years?

The GCC and the wider Middle East, is a vital and rising economic hub bringing people together from across Europe, Africa and Asia. International migrants working and living across the region represent a large part of the population. In the UAE, international migrants account for 88 per cent of the population, followed by Kuwait at 72 per cent, Bahrain at 51 per cent, Oman at 41 per cent, Jordan at 41 per cent and Lebanon at 34 per cent, according to the World Bank.

The large expatriate workforce in the region means that there is a strong need for them to send money to their families and loved ones back home. After the US, Saudi Arabia, UAE and Kuwait were in the top 10 remittance sending countries globally in 2017, according to the World Bank.

What are the most popular channels for remittances from the region?

Bank to bank transfer, digital transfers and cash to cash transfers all compete with each other to serve individuals who collectively sent $689bn globally in 2018, according to the World Bank. Popularity of a service is dependent on many factors – immediacy of access of funds for receivers, the specific need or purpose of funds, convenience, reliability and speed to the sender as well as the receiver.

The GCC has nationals from hundreds of countries. Does this complicate the process of remitting from the region?

Moving money internationally is complex. It involves currency conversion, navigating regulations and fees in hundreds of countries and territories, and a need to float money between transfers.

Currency volatility has been on the rise due to geopolitical events. How does this affect the market?

Many of our consumers are global migrants: people who move to new countries and send money home regularly. They make fundamental contributions to their families and communities, paying for things like education, healthcare, food, rent and other basic needs. Remittances are even more critical during times of economic downturn, natural disasters and war, with remittance flows tending to be resilient and counter-cyclical; increasing during these periods of unrest in the migrants’ home countries as migrants send more money home to help their families.

With most GCC states adopting nationalisation strategies, do you expect a drop in remittances?

Nationalisation in some markets is resulting in changing migration patterns as workers previously moving from South East Asia to fill jobs in GCC countries are shifting their location bases closer to home, causing a projected rise in intra-regional migration particularly in Asia and Africa.
The trend towards nationalism impacts any company that operates globally, and Western Union, like all global companies, are aware of these rising trends.

Remittance flows at the regional level may vary with improving economies in some GCC countries offsetting the resultant impact of nationalisation strategies on remittances, in others. We are closely monitoring the situation.

The fact is that despite the current trends, globalisation is a force that cannot be reversed. Two indisputable factors of our modern life make this inevitably so. First and most obviously, technology is making the world ever more connected. The other big piece of globalisation is a factor as old as time: migration. People have always moved from place to place to better their lot in life and as they move, they act as human bridges bringing cultural linkages and commerce with them.

Lastly, what are the main trends anticipated in the regional remittance market going forward?

The financial services and money transfer industry is in a period of significant change, spearheaded by the evolution of technology and growing demand for digital tools that help us manage our money faster and smarter. For incumbent players in the market, this new reality mandates a new way of thinking. Businesses need to leverage these new technologies to offer customers’ greater choice and improved services.

The world requires a new form of inclusive globalism, one that unites, empowers and prospers all people through technology. Technology is one thing which will enable individuals to participate directly in the global economy.