ELECTRONIC HOME REMITTANCES

1
ELECTRONIC HOME REMITTANCES

• An ABS proposal

2
INTRODUCTION

• An ABS introduction
• Company formed in 1995
• Principals played instrumental roles in
  introducing automation to the Pakistani Banking
  Sector
• SWIFT, NIFT, Secure Internet Messaging Solutions
• Principals have over 100 man years of banking
  automation experience

3
BACKGROUND OF PROPOSAL

• Pakistani expatriates Remit between 3-5 billion
  annually to Pakistan
• Revenue generated by banks is 60 million
  annually from this service alone
• Business is dominated by the 5 large Pakistani
  banks, which have overseas presence
• Banks/institutions without overseas presence have
  not been able to tap into this business/space
• Cutting edge technology allows ABS to identify an
  ITES opportunity which will enable institutions
  without overseas presence to tap into this
  market
• Solution is available, which will enable Bank AL
  Habib to enter this space, with the time to
  market within 3 months

4
MARKET SIZE

• Pakistanis remit over US 3.00 billion to
  Pakistan per annum (Source SBP)
• Remittances through un-official means are
  estimated at 2 billion
• Remittances is one of the highest foreign
  exchange earner for Pakistan
• Total potential revenue base of market size is
  US 60 million/annum (includes Hundi ME sectors)

5
Distribution of Market Size

• Sector Official Un-Official Total
• (figures are in millions per annum)
• USA 1,152 720 1,872 36
• UK 324 200 524 10
• Europe/Aus 336 220 556 11
• UAE 576 360 936 18
• ME 768 500 1,268 25

6
Having seen the market sizes and potential
revenues, we will now present the ABS solution
which is

• Financially Attractive
• Technically Sound
• Operationally Efficient

7
Current Options

• Current Options available
• to overseas Pakistanis for
• Home Remittances are

8
OPTION 1

• Pakistani Bank Branches abroad accept funds for
  home
• remittances
• Advantages
• Free service to the sender
• Disadvantages
• Branches are not located in many cities
• Branches not 24/7 operations (banking hrs only)
• Getting to a Pakistani Bank branch is time
  consuming
• The cost of time and travel, cost of time off
  from work and the inconveniences faced are
  extremely high
• No tracking facility

9
OPTION 2

• Direct transfer through a Foreign Bank
• Advantages
• Sender bank branch located in close proximity of
  sender
• Disadvantages
• Prohibitive charges
• Not 24/7 for international remittances
• Funds credit date at receivers bank account in
  Pakistan is not known (anywhere from 3 days to 2
  months)
• Extra charges for tracking and not done Real Time
• Need Routing Swift number details from
  receivers bank, which is often difficult to
  obtain and can cause serious delays if incorrect

10
OPTION 3

• Fund transfer service companies like
• Western Union and Money Gram
• Advantages
• Branches are located everywhere
• Online and offline money deposit options offered
  to senders in North America and Europe
• Fund transfer instant (within 5 minutes)
• Funds available for pick up in multiple locations
  across Pakistan (GPO/National Bank for Western
  Union, UBL/Al-Falah for Money Gram)
• Disadvantages
• Fund transfer rates are expensive (15-85 from
  US)
• Poor Exchange rates offered (Rs. 56.2 v/s 57.8)
• Additional services are charged and expensive

11
OPTION 4

• Other fund transfer companies like Yahoo,
• Moneybookers, Ikobo, Xoom, Onlinefx, etc
• Advantages
• Online transaction processing allows sender 24/7
  convenience of sending funds from home or office
• Instant fund transfer (within 5 minutes) if
  receiver has fund transfer service ATM card
• Disadvantages
• Fund transfer rates are expensive
• Most services issue an ATM card for fund
  withdrawal from Cirrus ATMs. Fund withdrawal
  rates high for receiver
• May take up to 4 weeks to receive first ATM card
• Assumption is receiver is ATM savvy
• ATMs are not widely located everywhere (limited
  coverage in Pakistan)
• Additional services are charged and expensive

12
Option 5

• UBL click2Remit
• UBL has realized the need to enter the electronic
  remittance
• Spacehowever, with a solution that they have not
  written,
• are not managing and can not customize
• Advantages
• Online 24/7
• Credit, debit cards and eCheques accepted
• Disadvantages
• Only for US customers
• Direct credit only within UBL accounts
• Non-UBL accounts have a mailing system solution
• Delivery process not electronic

13
Option 6 7

• Hundi/Hawala Systems
• Based on trust
• Unsecured
• Illegal
• Open to Money laundering
• All governments strongly discouraging this means
• Exchange Companies
• These are primarily an extension of a Pakistani
• Bank

14
Summary of Disadvantages

• Most are not 24/7
• Transfer charges high
• Global presence issues
• Poor exchange rates
• Coverage issues (ATM)
• Not integrated with Pakistani banking system
• Summary of remittances to sender not readily
  available
• Delay in funds transfers
• No tracking facilities

15
OPPORTUNITY

• An opportunity exists for a service
• that can
• Overcome all the disadvantages listed
• and
• Is Remitter friendly (easy to avail and operate)

16
WHAT DO WE PROPOSE

• Functionally ABS proposes
• Service will be an online 24/7 Remittance
  Solution available to anyone anywhere
• Economical Rates (free under the HRS)
• Rupee based transactions
• Customized to integrate with the Pakistani
  Banking System
• Bank Accounts credited within 24 hours or sooner
  (depending on recipient bank)
• All transactions documented from end to end,
  meeting all money laundering regulations in
  Pakistan abroad
• System prompted tracking of funds
• Tracking of Funds Feature available to sender
• Summary of remittances available to sender

17
WHAT DO WE PROPOSE

• Operationally ABS proposes
• ABS is selling a solution, not a software
• Solution will be delivered based on a Strategic
  relationship between ABS and Bank AL Habib
• ABSs role will be handling all aspects of
  service up to the transfer of funds into the
  Internet Merchant Account
• Bank AL Habibs role will be handling of all
  aspects of the processes after the delivery of
  funds in the merchant account
• ABS will handle the technical aspects while the
  Strategic Partner will handle the financial and
  administrative aspects of the service

18
ABS Solution

• Service will be delivered thru the internet
  accessible from anywhere/anytime 24/7
• Remitters access the service website
• New customers/remitters register (email
  verification/activation process) existing
  customers simply log-on
• Customer enters details of remittance and
  recipient
• Credit Cards is the current payment platform
  (others to follow)
• Website secure payment processing comes into
  operation with Secure Socket Layer (SSL)
  technology and customer enters credit card
  details
• Payment processing procedures check card validity
  and enters into authorization process. It
  immediately informs on website within 3 seconds
  of acceptance/decline of transaction to customer
• Auto email sent to customer of transaction
  confirmation with TR and Payment receipt
• Money credited to internet enabled Merchant
  Account in Pakistan within 5 seconds of
  transaction acceptance
• What have we achieved?
• Satisfied money laundering issues (end to end
  doc, amt, sender)
• Secured Payment platform
• Delivered funds to Bank AL Habib Ltd merchant
  account from customer account within 5
• seconds
• Solution ahead in timeline

19
ABS Solution(2)

• Funds will then be transferred from Merchant
  Account to
• Home Remittance department of each bank
• Citibank will (at a pre-determined time) transfer
  funds to Home Remittance department of each bank
  via SWIFT, based on Consolidated bank wise report
  submitted by ABS (under the instructions of Bank
  AL Habib)
• Corresponding detailed list (with recipient
  details) will be provided to each bank for onward
  credit of account holders (under the instructions
  of Bank AL Habib)
• MT103 generation for real time or offline
  delivery to banks
• SBP regulation of 24 hour credit for Home
  Remittances apply
• Auto Reconciliation will take place at
  predetermined times between ABS website
  transaction information and Citibank payment
  Gateway collection
• System overcomes all the disadvantages and is
  totally electronic from source to recipient bank
• What have we achieved?
• Successful transfer of funds to recipient bank
  account electronically
• and speedily

20
ABS Solution(3)

• POD from recipient bank will be sent to Bank AL
  Habib Ltd administration cell for status update
  (paper or electronic)
• Database of all transactions (with their status)
  is maintained for ready references by customers
  at any time
• System prompted follow up of transactions for all
  exception reports will improve delivery time and
  Turn Around
• Online tracking of status by customer available
  thru its life cycle
• Track back interface will be available for Home
  Remittances departments for immediate updates
• What have we achieved?
• Follow up online on status and system prompted
• History available for viewing and printing (also
  can be used
• for consulate submissions)

21
Security Issues

• 128 bit encryption
• SSL
• Firewalls (hardware software at both ends)
• Secure Payment Gateway
• Best of breed technologies
• Encrypted database

22
Financials
23
INCOME PROJECTION

• Based on market stats and surveys
• Total market size US 3.0 Billion annually
• Hundi is another 2 billion (not included in
  calculations)
• Less Middle East residents due to non-credit card
  culture (US 1.2 Billion annually)
• Present Market Size US 1.8 Billion/annum
• Average Annual Transactions 3.6 Million

24
INCOME PROJECTION(2)

• Assumed target market share
• 10 - valued at US 180 Million per annum
• Average transaction volume is 360,000/annum
• Remittance commission from SBP is as follows
• SR 25 x 360,000 SR 9 million Rs. 135
  million
• Impact of 1 growth Rs. 13.5 million/annum
• Total Market Share (Hundi Legal)
• 10 Rs. 378 Million/annum
• 1 impact Rs. 37.8 Million/annum

25
EXPENSES AT A GLANCE

• The expense for this project can be divided into
• two distinct areas
• A) Technical System expense
• B) The fund handling and distribution expense,
  both initial and running
• Details of Technical System Expenses
• System Development
• Hosting
• Cost of Servers
• Cost of Bandwidth Requirements
• Cost of Communication
• Cost of System Operations
• Cost of Continued Development
• Cost of Project Management

26
EXPENSES AT A GLANCE

• Details of Bank AL Habib Expenses
• Cost of setting up Merchant Account
• Cost of Publicity campaign, initial running
• Cost of Distribution thru Banks Telex Charges,
  etc
• Cost of fund deposit and withholding costs by
  Merchant Bank
• Cost of Dispute settlements/Charge backs
• Legal costs
• Costs of arrangements with Banks
• Cost of Transaction Authorization charges
• Cost of Insurance against charge backs

27
We have demonstrated a solution which is-
Financially Attractive- Technically Sound-
Operationally EfficientWhats the next move?