Confidential and Proprietary of Western Union - 2008

Being Responsive and Accessible to Migrant Workers

A Western Union Perspective David Batubara

Country Director – Western Union Indonesia

Confidential and Proprietary of Western Union - 2008

130+ Years in Money Transfer…

…… Over 300,000 locations worldwide

Confidential and Proprietary of Western Union - 2008

Source: Aite Group

Cross Border Market

$300B

$213B

2003 2007

10%

20%

2003 2007

Cross-Border Remittance Principal

Market

Western Union share ofCross-Border

Remittance Principal

Confidential and Proprietary of Western Union - 2008

Banks

40%Post Offices

35%

Others (Retailers, Forex House, Pawn Shop…)

25%

World wide Partners

Class-of-trade diversity:- Closer access for customers….

- Allows customer to choose convenience location…. - Flexible opening hours….

Class-of-trade diversity:- Closer access for customers….

- Allows customer to choose convenience location…. - Flexible opening hours….

Confidential and Proprietary of Western Union - 2008

Partners in Asia Pacific

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Migrants prefer easy access & convenience channels to send money

home….

Formal vs In-formal channels?

Bank vs Non- bank channels?

Cash vs Bank account?

Meeting Sender’s needs

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Accessible to Receivers

Receivers also prefer easy access & convenience channels to receive money….

Formal vs In-formal channels?

Bank vs Non- bank channels?

Cash vs Bank account?

City vs Rural?

Confidential and Proprietary of Western Union - 2008

Accessible from Cities to Rural

Confidential and Proprietary of Western Union - 2008

Being Responsive to Migrants

Confidential and Proprietary of Western Union - 2008

Being Responsive to Receivers

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Perspectives in Sending Country….

• Indonesia Migrant profile: low education, working in informal sectors, difficult to reach them, majority unbanked

• Geographic spread of Indonesian migrant across Malaysia, makes convenience of locations a key consideration

• Migrant working hours necessitate 7 day, an extended hours service is crucial, domestic helpers - no day off

• Informal channels offer easy access and convenience, but “lack an AML Compliance”, bringing in concomitant risks

• ‘Unregulated industry’ has arisen to facilitate remitting funds through formal channels to be difficult, this industry includes mediators, migrant agencies, and informal channels that are part of formal enterprises

• Value added free insurance (offered by WU), meets “continuity of income”need of migrants

Confidential and Proprietary of Western Union - 2008

Perspectives in Receiving Country….

• Indonesia Receivers profile: low education, poor, majority unbanked, low income, no saving affordability

• Geographic spread of migrants origin across Indonesia, makes convenience of locations a key consideration

• Large unbanked and rural base in Indonesia, ‘intimidated’ of using Banking service, makes cash payout an important option for receivers

• Ironically, informal channels utilizing Banking infrastructure to “run” their business, but unable to trace and bringing in concomitant risks

Confidential and Proprietary of Western Union - 2008

Compliance..!!

• Formal operators perform KYC, significant investment made by formal operators in name verification, tools to monitor transaction

• Informal operators do not do KYC, creating cost advantage but with concomitant risks, dominating channels for migrants

• Western Union & its partners worldwide:– Complies with all applicable AML laws and regulations everywhere Western

Union does business.– Provides AML support and guidance to Western Union’s Partners

worldwide.– Work in partnership with AML regulators and policy makers worldwide to

develop effective and workable regulations.

Confidential and Proprietary of Western Union - 2008

Summary

Meeting “consumers needs” – accessible, convenience, key to convert informal to formal..

‘Unregulated industry’ has arisen to facilitate remitting funds through formal channels to be difficult, this industry includes account mediators, migration agents or agencies, and informal channels that are part of formal enterprises

Historically access a key constraint, inhibiting widespread use of formal channels, recent policy permitting retail/MTOs towards addressing convenience & access needs, both in Malaysia and Indonesia

Informal operators/money changers offer easy access & convenience but lack an AML Compliance program bringing in concomitant risks

Compliance, a key pre-requisite to regularizing informal operators, Formal operators can play a role here in bringing in requisite skills

Safety of customer funds is paramount. Review and credit assessment key to ensure safety of transaction with smaller operators. Formal sector can play a role here

Confidential and Proprietary of Western Union - 2008

Win-Win-Win for Migrants – Institutions – Regulators….marry the convenience offered by informal players with the expertise in payments and

AML Compliance offered by formal players…..

Terima Kasih

Confidential and Proprietary of Western Union - 2008