Monday, October 09, 2006

Global remittances sorted?

At a time when European ACHs are having to justify their business strategies and compete in what is largely a volume business, Voca CEO Marion King was positively beaming as she announced the UK clearing house's partnership with Citigroup in providing a "low cost" global remittance solution for UK banks.

According to World Bank figures, the global remittance business (foreign nationals sending money back to their home countries)generates somewhere in the region of £49 billion a year. Yet, the banks have been relatively unsuccessful in capturing the lion's share of the global remittance business, which is dominated by money transfer agencies such as Western Union. Lack of competitive pricing from the banks is cited as one of the common causes of the remittance business falling out of the hands of the banks.

In a rhetorical barb directed at the transfer agencies that have been cashing in on remittances, Marion King, Voca's CEO, said the joint rremittanceservice it developed with Citigroup would allow banks to offer lower cost remittances than Western Union, for example. "For many banks to set up such a solution the infrastructure costs would be too prohibitive," King said.

King is hoping that Citi's global payments expertise and franchise and Voca's already established payments processing capabilities will make the solution a "win-win" for all parties concerned.The service offered by Citi and Voca will enable customers to make remittances from their current accounts using the internet.

The global cash management banks seem unusually humbled by the remittances debate. Normally they like to boast they have the capabilities inhouse to offer payments globally, but obviously remittances was one area where they realised it would be more difficult to do something on their own.

Interestingly, Eric Sepkes of Citigroup, who recently challenged the European Commission as to how many ACHs Europe could sustain post the introduction of the Single Euro Payments Area (SEPA,) was in the audience at the announcement of the deal with Voca on the opening day of the Sibos conference in Sydney, Australia.

With this announcement, which is obviously geared at ramping up Voca's payments volumes, does this mean that Voca and its CEO can breathe a sigh of relief? European ACHs are not only under pressure from banks to consolidate, but also some banks have made it clear they are not happy about clearing houses like Voca having pan-European ambitions; offering pan-European as well as domestic payment instruments when SEPA comes into force from 2008.

No comments: