"Exchange rate fluctuations don't impact remittance business"
Anil Kapur, Managing Director, South Asia, of Western Union, the global leader in international remittance business, was in Nepal recently to inaugurate the partnership of his company with the Nepali Postal Service under which Nepal's 200 post offices will be handling remittances sent in through Western Union. He shares his company's plans for Nepal. Excerpts from an interview:
What is the strategic advantage of this tie up between Western Union and Nepali post offices?
We believe that with the Nepali Post Offices becoming a Western Union agent, this service will gain a wider reach because the Post Office has a far reaching network. We will be able to reach out to people who so far have had no access to any money transfer product.
Also, we believe this is a historic moment because this is the first public-private partnership that the Post Offices have ever got into. Nepali Postal Services are more than 100 years old and Western Union is also more than 150 years old. Thus both institutions have a long history behind them and I think this partnership is going to bring a lot of success to the money transfer business in Nepal.
What is the current status of Western Union when it comes to market share?
We anticipate about 1.4 billion dollars will come into Nepal in 2007 as remittances and Western Union has a pretty small share in this. While Western Union has been in operation in Nepal for about 10 years now, the focus in Nepal has only started in the last two years. We have recently signed up with major business houses and public sector banks and now with the Nepali Postal Services. With them coming on board, our market share is going to increase significantly and I think over time, we will generate much more business.
How is the impact of weakened dollar on your business?
It doesn’t really impact our business significantly and I say that because our customers are those people who send money every month. These are people who are sending money for household expenses, school fees, medical expenses, purchase of consumers durables, household goods etc. So, in spite of whatever happens to the dollar, people have to send back money to their family. Yes when the dollar becomes very weak, they may hold on to their money for some time - for 10 days, 15 days or even a month but beyond that, the family needs money. So, exchange rate fluctuations don’t impact our business significantly.
There are three major things that we want for our business to grow. First, we need to create awareness. People need to know what the service is and how it works. They should know that ours is a 10-minute service irrespective of from where the money is sent in. We have 1,500 locations in Nepal and in any of these locations, you can receive money in 10 minutes. You don’t even need a bank account. So, it’s a very convenient service. We need to create awareness about that.
Second, we need distribution and access. That is why we have signed up with all the large institutions, post offices, banks etc. Today the customer still travels 15 km to get his money. We want to reduce his traveling time.
The third is affordability. We definitely want our service to be affordable to these people who are earning 400-500 dollars a month. That’s why in the last 2-3 years, we have taken many steps to reduce our prices.
You have been using banking channels for moving the remittance. Banks themselves could have done it. What are the weaknesses of banks which Western Union is capitalizing on?
The first reason is that the banks do not have that international reach which Western Union has. Now Western Union is the largest money transfer company in the world. We have 300,000 locations and we are operating in 200 countries. No bank individually can match this reach. Tying up with Western Union, they get the same international reach.
The second is that in Nepal many people don’t have bank accounts. Banks have limitations to reach them. Banks can open only limited branches but Western Union can appoint all types of agents. People who don’t have bank accounts will be coming to banks because of Western Union and then the banks can open accounts for these people. Thus the banks benefit by tying up with us.
So the bank benefits in international reach and by bringing in new customers who come in because of Western Union.
What is the market share of WU globally?
Western Union’s global market share is 17.4 per cent. In 2006, it was estimated that the worldwide remittance market was 269 billion dollars. In the last 3-4 years our share has gone up a lot.
Who are your competitors?
Most money transfer is still done by banks around the world but there are companies like us which are smaller in size. For example there is a company called “Money Gram”. It is a smaller company and they are our competitors. Then you also have exchange houses in the Gulf. But many of them focus only on remittances from specific places like Dubai to Nepal or Qatar to Nepal. Though these houses are also in the business and compete with us, they are much smaller. We are global.
Only a small percent of remitters use official channels as unofficial channels have price advantage. How are you competing in this situation?
People will always prefer formal channels to informal channels; provided a formal channel gives them speed and convenience that the informal channels give. Western Union is the fastest formal service in the world. It gives you immediate 10 minute service. It’s very convenient as I explained to you; you don’t need a bank account.
The other thing a formal channel requires is that its service must be affordable. So if the commission that WU charges is affordable and is competitive with the informal rate, then the receiver will always prefer formal service. Informal services sometimes may lead to money not reaching the desired person. You will not know who to go to when this happens.
Wherever we are operating in South Asia, we have seen that the minute we create awareness and tell the people that our formal service is better than the informal service, they shift to our services. If you look at Western Union’s growth in south Asia, most of it is coming from people moving from informal to formal service.
How do currency restrictions or other political turmoil impact WU business?
We work within the regulated environment. Today all agents of Western Union have approval from the Central Bank to offer the Western Union service. We do not speculate on what can happen with the political situation. Political situations keep on changing from country to country and we have seen different situations in Nepal already. We believe this service is for the common man. Any political party anywhere wants the common man to benefit in the country. So we believe that we are providing a service which is unquestionable and therefore gets support from everybody.
Also we now have a very strong tie-up with the Postal Services Department of the Government. So we work for the government institutions. In fact we are working with government banks like Nepal Bank and Rastriya Banijya Bank. We are partners already with the government. So, we see that as our strength.
What about remittance by internet service?
Well, we do have a service through westernunion.com internationally in countries like the USA and UK. You can go and send money through westernunion.com. But our focus is always on cash to cash service because in most parts of South Asia, there isn’t access to the internet. Also the people do not have bank accounts to receive payments. People need cash. So that is our philosophy and that is our model.
"I'd like to see Nokia Nepal"
Prem Prakash Chand, Nokia's General Manager for Emerging Asia (which includes Bangladesh, Nepal, Bhutan, Sri Lanka and Maldives), who was in Nepal recently to inaugurate his company's two distributorships here, explains Nokia's plan for Nepal. Excerpts from an interview:
Any reason for selecting this time to enter Nepal?
Over the last six months, we have been evaluating the Nepali market. We see that Nepal, while having a very low penetration, has got a huge potential. So we feel the time is right for us to be in this market. The emerging market is really going to contribute to the growth of the mobile industry and markets like Nepal, India and Bangladesh are key in this.
Why have you been so late in coming here?
I don't believe we are late. I think the timing is right. If you look at it, this market has been, very much, a grey market: in excess of 90 per cent of the handsets sold here are grey. Also, even without being here, we are selling a lot of handsets. But we don't believe that the consumers who are buying the brand are getting the right Nokia experience. We feel that with the situation much more stable, a lot more deregulation will happen, and the market will be opened up. So timing wise, we are not late. We are here just at the right time.
What makes Nokia a top brand in Asia?
You need to do a lot of things right for this. I think you need to understand the consumer: You need to know what he is buying. You need to understand where technology is going. You need to be able to spend a lot of money on research and development. You need to then develop the right product but only developing it is not the answer. You need to ensure that you can give the product to the customer in the most efficient manner. You need to have the right distribution strategy.
And you need to have the right customer care. You need to provide customers the right experience when they buy the product. Once the product is bought, that is not the end of its value. That is when the sale actually starts. So the after-sales experience is important. What we believe we have done very well is that we've built a brand which promises a lot of things. But we've also built an infrastructure and a culture to deliver on the promises. Lots of companies build a brand and they build a promise but they don't have all the elements right to deliver on that promise.
What are the latest innovations/features in Nokia phones?
If you compare us with a broad range of products, perhaps we have the most number of products in a portfolio. We cater for the entry level and we cater to the technology as well. So coming back to the question about what we have to offer, we will be introducing new products in July for the entry level. These are products which are more durable, easy to use as they have longer battery life with flashlights on them. They will be priced affordably.
How is your assessment of the Nepali market?
If you look at the subscribers, there are 1.4 million here. The general view is that they are growing at the rate of 50 thousand a month.
So what is your market share in Nepal?
We believe that our market share is at 55 per cent and we would like to grow that by at least 10 per cent. But the key target that I personally have is to decrease the grey market from 90 per cent to below 30-35 percent.
What is your plan for Nepal?
I would like to see a full-fledged sales organisation here. Like we have Nokia India, Nokia Bangladesh, I would like to see a Nokia Nepal.
What will the just appointed Nokia distributors do other than distributing the sets?
A number of things. We are only distributing here but they will work under the Nokia guidelines. We will provide training to the local partners the distributors, and retailers. So we will be investing in the country. We will be creating customer service. Certainly we will also be looking at the local labels in our product offering. Like we have Hindi and Bangla in our sets. We will be looking at all that.
