Overseas Filipino Workers (OFW) have been typically portrayed as “Mga Bagong Bayani” (new heroes) of the Philippine economy for decades. That’s not surprising because after all, the current 10 million OFWs around the world, accounting for roughly 10 percent of the country’s population, command about $28 billion in annual money remittances, as per 2017 data from the Bangko Sentral ng Pilipinas (BSP). That amount is almost equal to the annual revenue being generated by the business process outsourcing (BPO) industry in total.
Yet, we always hear sad stories of an OFW being abused physically, mentally, and sexually. However, there is this most common, yet unnoticed, abuse they are experiencing every single day that remains unsolved – the financial abuse.
When OFWs discuss remittances, it is common for them to compare banks and remittance centers that offer the best exchange rates for the Philippine peso. That is because both the banks and remittance centers offer lower exchange rates compared with the market exchange rates, for profit reasons. Then they compare the remittance charges, which further dilute their remittances to their families in the Philippines.
For example, a regular domestic helper here in Hong Kong earns about HK$4,410, equivalent to P29,000 using today’s market exchange rate. Normally, if it is coursed through a bank or any financial services company, the rate is lower, so the equivalent could be as low as P28,000, or there is a dilution of P1,000. When the recipient bank or financial services company in the Philippines receives the remittance, it will also deduct fees resulting in further dilution to, let’s say, P27,500. In addition, it sometimes takes two to three days for their remittance to be received by their families and loved ones back home.
From P29,000 to P27,500, there is about 5 percent dilution in every remittance transaction, which is almost equal to the projected inflation and monthly interest rate on loans and credit cards that just reduces the purchasing power and value of the OFW remittances. Let it be noted that the OFW has to incur costs going to the remittance centers in their host countries and wait for her turn at very long queues, which sometimes result in missed lunches and even missed bonding moments with their fellow OFWs during their day off.
Recently, the government considered tapping the help of the Alibaba group’s financial technology solutions to help cut the remittance costs for OFWs. Alibaba’s founder and tech billionaire Jack Ma has seen the opportunity in this market. In fact, his group has invested in the country through Alibaba’s Ant Financial’s investment in Mynt, a Globe Telecom venture.
These partner companies are planning to introduce a “cashless society,” as Jack Ma mentioned in his speech at the DLSU forum, through the use of mobile payment technology. This technology is widely used now in China and other developed places such as Hong Kong, where people can transact without withdrawing money from their ATMs, and use their phones for payments and remittance transactions.
This is a good solution or disruption to the remittances industry through the reduction of transaction fees, better exchange rates, and fast transfers in just minutes. I myself am a user of these fintech products in Hong Kong and
I can really vouch for their efficiency and effectiveness. However, being in the local and international fintech scene for years now as someone who has experienced being both a relative of an OFW and being an OFW myself, I can see a lot of challenges in the adoption of fintech services by the Philippine market, particularly of OFWs and their families.
First, how would these solutions reach the segment of their target market that doesn’t even own a mobile phone? And even if they do, some of these people have very poor network coverage, or they use a different telecom provider. Let it be noted that the ultra high-speed internet project with Facebook will take about two to three years to complete.
Second, how would such fintech services woo OFWs who are currently using other remittance solutions (there are about a hundred of them) without causing them inconvenience? Normally, these online payment solutions have partnerships with select banks and remittance centers in the Philippines. Would these banks and remittance centers be willing to partner with payment solution providers for “cashless” transactions without getting anything in return? And let’s get more techie in this next question—how would these solutions react once the blockchain technology is adopted?
Third, how can these fintech solutions be explored more to offer more products and services to OFWs and their families? Poverty, low pay, and scarcity of opportunities are the most cited reasons by OFWs as their motivation for going overseas. How can these fintech companies and the government help them to finally go back home and use their talents and skills in their home country?
Clearly, there is a lot of untapped potential in the billion-dollar OFW market waiting to be explored. Whoever taps it first is likely to have the first mover advantage because Filipinos are known for brand loyalty that passes from generation to generation. Whoever wins the home country’s heart, wins the heart of all Filipinos around the world. After all, home is where the heart is.
Jay Olos is currently the group head of Finance for CompareAsia Group and a member of the Board of Directors of MoneyMax.ph, the Philippines’ leading comparison website for insurance, credit cards and loans. To save money through free and fair financial information, tweet @MoneyMaxPH, like us on Facebook at MoneyMax.ph, and email your comments to firstname.lastname@example.org. For more information, visit our website: www.MoneyMax.ph