Fintechs having ‘no impact’, says remittances CEO

Al Fardan

• Cheaper fees ‘not sustainable’
• Global disruption not seen in UAE
• 80% of business through branches

Fintechs are no threat to the UAE-based remittances company Al Fardan Exchange, its CEO Hasan Al Fardan has declared.

Al Fardan said there was no intention to drop fees to compete with finance technology startups.

To date, he said, fintechs have had “no material impact on our business or our operations. We are hitting record volumes. Am I losing sleep? Absolutely not.”

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Migrant workers make up 88 percent of the UAE’s population and remittances are seen as an essential tool for economic and social development.

The UAE was among the highest ranked countries in the world for outward remittances in 2023, at $38.5 billion, a report from the World Bank and Knomad revealed.

The global remittances industry is being disrupted by fintech startups that are developing digital options and applications, offering a cheaper alternative to traditional providers.

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The fees charged globally for remittances sent through mobile operators in 2023 were the equivalent of 4.1 percent of funds transferred, against fees equal to 12 percent on remittances sent through conventional remittance service providers or traditional banking channels, according to the Migration Policy Institute.

“There are fintechs trying to grab a little bit of our market share, though it hasn’t really impacted us significantly,” Al Fardan said, speaking at the launch event for the Dubai AI & Web3 Festival, which will take place in September.

“I still believe and feel that we are better than them, even though sometimes we see very aggressive customer acquisition activity within the sector. It’s just a matter of time before they revert back to normal pricing, because that’s not something that they can sustain long-term.”

The World Bank’s remittances prices database shows remittance costs remain persistently high, at 6.2 percent on average to send $200, as of the second quarter of 2023. The cost in the UAE is roughly half this amount. 

One of the UN’s sustainable development goals, to help reduce global inequality, is to reduce migrant remittance costs to less than 3 percent by 2030.

Branch growth

Al Fardan Exchange currently operates 87 branches across the UAE and plans to increase this to 100 by the end of the year.

The business has registered a 30 percent compound annual growth rate in volumes over the past five years. This has included a 40 percent increase in money sent to Africa in the past year alone.

Al Fardan said 80 percent of the company’s business was conducted through bricks-and-mortar branches, with the remaining 20 percent going through its own digital channels.

In February this year, remittance houses in the UAE were given approval by the UAE central bank to increase fees by 15 percent, the first change in fees in five years.

“I struggle to see fees going down,” said Al Fardan.

“Ultimately, remittances are what we describe as a core product or core service, in the same way that you have to spend money on food and water and electricity, which are subject to certain levels of inflation.

“I think it’s only fair to treat the cost of remittance in the same way.”