Hatem Sleiman, Regional Vice President – Middle East, Pakistan & Afghanistan at Western Union, discussed the future of the remittances industry and the importance of customer protection in an interview in The Emirates Today Newspaper. Read his full Q & A below.
In the age of Crypto and digital currencies, what are the top 5 challenges that encounter digital and traditional remittances, in your opinion?
We have looked very carefully at how cryptocurrencies and blockchain technology can impact our industry, and how they can help our customers. We have also done some specific testing in this space. At this point in time, we do not see a short or medium-term impact on the payments value chain. We do not see cryptocurrencies accelerate financial inclusion as it relates to cross-border remittances; they would need to reach enormous numbers of people, through low-cost, reliable transactions. Cryptocurrencies cannot offer this because they were simply not built for scale. However, we do not underestimate the challenge.
Any adoption of a cryptocurrency offering for our money transfer customers would likely be in response to consumer demand, and we would only consider it if there was appropriate regulatory acceptance. Also, our ecosystem is built with the flexibility to allow us to adapt to the increased use of digital currencies and the ways in which they are held and used. Our systems and processes enable our agents to pay money transfers in approximately 130 currencies worldwide; adopting another currency won’t be a problem.
Do you foresee remittances activity outside the central banking system? Will there be independent remittances networks beyond the central/governmental authority?
I do not see the remittances industry operating outside the regulatory ecosystem in the near future. We are seeing some attempts, but these are not scalable.
The financial services industry is heavily regulated. These include increasingly strict legal and regulatory requirements intended to help detect and prevent money laundering, terrorist financing, fraud, and other illicit activity. These also include laws and regulations regarding financial services, consumer disclosure and consumer protection and currency controls, among many others. Cross-border payments operate in a global market. A formalized consultative structure is essential to avoid unintended consequences. The regulation also gives businesses the clarity they need to operate confidently.
Our business is based on trust, and, therefore, it’s important to place the highest priority on compliance with local laws to stamp out illegal activity, like money laundering and fraud. It’s important to invest in technology to enhance compliance, keeping “bad money” out of the system so that consumers can rely on you to offer a service that complies with local laws and regulations.
What are your concerns against the hackers’ attacks on the digital systems/platforms that are used to remit money across borders?
Protecting our customers – their transactions, their money and their information – is our number one priority. Our business is based on trust, and, therefore, we place the highest priority on compliance with local laws. Western Union security measures include physical, electronic and procedural safeguards.
We have a comprehensive Cybersecurity Program that focuses on identifying risks through ongoing risk assessments, internal audits, and regular scanning and testing. We also have a robust Incident Response Program designed to quickly detect, respond and recover from an incident. We carry out periodic attack simulations, penetration testing and other tests of our vulnerability, including exercises involving the participation of our executive leadership team.
Given the nature of our business, security is a crucial focus for us. Our cybersecurity strategy constantly evolves to anticipate and respond to existing and emerging threats as well as address the newest laws and regulations that speak to data privacy and cybersecurity.
We work closely with all of our technology vendors requiring that the right policies and tools are configured to prevent or contain the impact of a potential cybersecurity risk, through access control, specific policies and procedures, as well as employee training and awareness. We have invested significantly to build a global brand – one that our consumers trust – so we are committed to holding all entities that represent Western Union to our high standards of compliance.
During the conference, you discussed the idea of adopting technological innovation to enhance cross-border payments, what are the challenges that you foresee adopting this idea?
Unlike other areas of Fintech, cross-border payments by definition require businesses to operate globally immediately, which introduces multi-national regulatory requirements.
The time, money, expertise and resources it takes to be able to adhere to the complex, multiple layers of regulations in both the originating and receiving markets is a tremendous challenge.
The biggest challenge is related to licensing and compliance regulations for cross-border payments as compared to domestic.
Cross-border payments require approvals from central banks and maintaining licenses and local entities.
It’s not just operational of how to move the money, but how to move the money in a compliant way that meets the obligations of each market.
The cross-border space requires navigating complexities up and down the payments stack. This includes geographic coverage, last-mile reach, liquidity/FX management and compliance, which makes many prevalent solutions seem lacking in innovation.
Because we operate and have been operating in 200+ countries and territories, we have local leads in all markets that keep us up to speed on trends. We are connected with local regulators so that we are not surprised when there are changes to local compliance rules.
It’s important to have a local ear on the trends to keep ahead of the changes in the marketplace. Our regional teams drive strategy and relationships around the world to keep us at the forefront of cross-border payments.