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| Ismail Ahmed Founder |
By Will Smale - Business reporter, BBC News
Fearful that some
remittances being sent to countries in eastern Africa, the Middle East and
South Asia could be being used to fund terrorist activities, a number of
smaller money transfer companies were shut down.
While completely
understandable from a security point of view, the knock-on effect was that many
innocent people in places such as Somalia suddenly found that it was much more
difficult to receive vital funds from expat relatives living in the West.
This was money they
needed to put food on the table, or clothe their children, or keep a roof above
their heads.
One man who was
increasingly aware of the problem was Ismail Ahmed. He was born and raised in
Somaliland, the autonomous northern part of Somalia, before being educated in
the UK after winning a World Bank scholarship.
In his early 30s at
the time, Mr Ahmed was an expert in remittances and the money transfer
industry, having focused on the subjects while doing a PhD in development
economics at Imperial College in London.
Turning his expertise
into a business opportunity, and wishing to help, he started to advise a number
of smaller money transfer firms, both in the UK and overseas, on how they could
best meet the more stringent security rules.
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Such was his success
in doing so that in 2004 the United Nations Development Programme - the UN
agency which aims to improve conditions in the developing world - asked him to
join their team which was trying to tackle the same problem.
Yet after an unhappy
time at the UN, which saw him quit after becoming a whistleblower to fraud and
corruption, Mr Ahmed determined to launch his own money transfer business.
"Being digital
enables us to be as security stringent as possible"......Ismail Ahmed
He recognised that if
he created such a firm that was as digitally-based as possible, he could both
be as security conscious as possible, and keep costs down enough to enable him
to offer substantially lower transaction fees than the industry leaders.
So the idea for his
new company, WorldRemit, was born.
No
agents
To understand how
WorldRemit works, it is necessary to look at the long-established business
model for sending remittances by money transfer firms.
Many people in Africa rely on remittances from
relatives in the West
Typically this
involves person A in a rich country paying cash to an agent of the transfer
firm, be it a bank branch or accredited corner shop.
The money is then
transferred to a nation in the developing world, where person B goes to another
agent of the transfer firm, again typically a bank or shop, or bureau de
change, and then withdraws the money in cash. If the money is sent to a bank,
it doesn't go directly into a person's account.
This is the model that
global leaders Western Union and MoneyGram, and their hundreds of smaller
rivals, have followed for decades.
"I'm proud to be making a difference to people's lives"….Ismail Ahmed
The security concern
in this post 9/11 world is whether this system of money transfer is at risk of
abuse, such as people using false identification, or trying to launder money.
It is a concern which
has cost the big players rather a lot of money in fines. In 2010 Western Union
was fined $94m (£60m) by the state of Arizona for not doing enough to prevent
money laundering by Mexican drugs gangs, while in 2012 MoneyGram had to pay a
$100m penalty.
Then last year, UK
bank Barclays announced that it was closing the accounts of all but 19 of its
165 clients in the remittance transfer business.
Users can send money via WorldRemit's website
or mobile phone app
To mitigate such
security concerns, on the sending side of remittance transfer WorldRemit only
accepts funds electronically via its website or mobile phone app - it doesn't
have any agents to whom you can turn up with a big bag of banknotes.
Mr Ahmed explains:
"Being digital enables us to be as security stringent as possible.
"We screen all
our transactions against sanction lists, and we can pick out suspicious or
unusual behaviour almost immediately. For example, when someone tries a number
of cards to get one of them to work - no legitimate customer would do that.
"And we aren't
reliant upon a busy shopkeeper to do the security work for us."
Mr Ahmed adds that
such a digital only approach also enables WorldRemit to charge fees that are
less than half those of the big players, a statement which is confirmed when
you check its prices against those of the likes of Western Union.
Less
cash pick-ups
WorldRemit also says
it is at the forefront of digitalising the receiving end of remittance
exchanges, with cash pick-ups only accounting for one third of its transactions,
compared with 95% for the market as a whole.
The other two thirds
of WorldRemit transactions see people get paid the money directly to their bank
account, or increasingly, to their mobile phone.
A growing number of Africans are using their
mobile phones as cash cards
The latter has been
made possible after WorldRemit signed agreements with mobile phone networks and
payment systems such as Ecocash in Zimbabwe, which enable people to use their
mobile phones as if they were cash cards.
And while the big
players in the industry are now also increasingly offering digital transfers
and pick-ups, Mr Ahmed says that none yet come close to WorldRemit's global
reach.
For example, while
Moneygram will only allow online transfers to bank accounts in nine countries,
at WorldRemit it is more than 50.
Mr Ahmed says:
"In many countries and cities you have to remember that people don't want
to have to be walking around with cash for security reasons.
"Also it is often
a very long walk to the nearest bank, which could be closed."
Growing
fast
Mr Ahmed launched
WorldRemit in 2010 after first doing a master of business administration (MBA)
course at London Business School (LBS), as he said he needed to increase his
skills at running a business.
While at LBS he
successfully pitched his idea to some wealthy investors who bought a stake in
the business.
WorldRemit's workforce has grown fast in the
past year
An investment fund has
subsequently also come on board.
WorldRemit has its
headquarters in west London, and this year has seen its workforce triple to 110
people.
It currently helps
people around the world make 200,000 transfers a month. This is a drop in the
ocean compared with Western Union or MoneyGram, but Mr Ahmed says he has the
ambition to grow strongly.
"I'm proud to be
making a difference to people's lives," says Mr Ahmed.
Follow Will Smale on Twitter @WillSmale1
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