Banking & Finance Rising cost of living boosts Mena remittance flows by 73% By Melissa Hancock March 24, 2023 Creative Commons/Jan Chipchase Two thirds (66%) of the region’s money transfer users said they send and/or receive money once a month or more UAE has $47bn of outflows, Saudi Arabia has $40.7bn79% of consumers would like ‘super’ apps to manage remittancesSeven out of 10 payment transactions in Middle East are now non-cash The higher global cost of living in the Middle East and North Africa has resulted in a 73 percent increase in the remittance of money across the region, according to new research published this week. US global money transfer company Western Union found that 79 percent of those receiving funds in the Mena region between October 2022 and January 2023 said they had asked to be sent more money. Currently, 66 percent of the region’s money transfer users send and/or receive money once a month or more. Over the next 12 months, 75 percent expect these remittances to increase. Gulf to see a surge in ‘super apps’ in 2023, says Kuwaiti retailerLet’s make it faster and cheaper to send money homeMore UAE banks must sign up for true benefits of instant payments Citing World Bank data, the report showed that the UAE is the second-largest ‘send’ market in the world, with $47 billion of outflows. Saudi Arabia ranked as the third largest market, recording $40.7 billion of outflows, with the report noting that the kingdom’s digital maturity gives it a big advantage. After cost-of-living, currency devaluations rank as the second key driver of Mena remittances, with 69 percent of consumers sending more money when the currency value falls in their receiving country. The study found that 79 percent are eager for integrated ‘super’ apps, allowing them to manage remittances alongside other financial products with ease. Consequently, Mena consumers are keen for money-transfer providers to innovate to enable even greater convenience, better planning and inclusivity. Government support – particularly within both the UAE and Saudi Arabia – is also helping to drive innovation within the financial services industry, the report found. “The progress of innovations within financial services has been astonishing,” said Jean Claude Farah, president of Middle East and Asia Pacific at Western Union. “Whether in countries such as the Philippines, Australia, the UAE, Singapore or Saudi Arabia, central bank investments have created a vast array of safe and reliable choices for consumers.” In May last year the UAE central bank announced it was launching a domestic real-time payments scheme – the Instant Payments Platform (IPP) – in 2023 to further strengthen Dubai’s digital finance offering. The IPP will enable instant transfers between bank accounts 24/7/365 and requires that recipient banks credit amounts to their customers no more than 60 seconds after a payment is received. In doing so, it aims to provide best-in-class payments services, promote financial inclusion and increase financial stability in the UAE. Payments systems operator ACI Worldwide predicts the IPP will help instant payments in the UAE to grow to 134 million by 2026, although it notes that banks and financial institutions have been slow to sign up and are going to have to modernise their system to meet the new regulations. Other Gulf countries are also pushing ahead with their own plans on this front. Bahrain was the first GCC state to implement a real-time payments scheme, known as Fawri+, which was launched in 2015. Oman launched its Mobile Payments Clearing and Settlement System (MPCSS, or MPClear) in July 2017, while Saudi Arabia launched its inaugural real-time payments system, Sarie, in April 2021. Looking ahead, the Mena region’s rising demand for remittances will likely also provide a boost to its increasingly competitive fintech sector. The Mena Fintech Association has forecast that almost seven out of 10 payment transactions in the Middle East will be non-cash in 2023. Saudi Arabia is poised to launch three digital banks over the next 12 months and is seeking to become the gateway for fintech activity in the Middle East. The kingdom aims to host over 500 fintechs by 2030 and offer 18,000 related jobs, with the sector contributing $3.5 billion to the economy. The UAE fintech market is anticipated to register a compound annual growth rate of over 10 percent between 2023 to 2028.