The Evolution and Impact of Digital Remittances
This article is brought to you in partnership with Visa.
The landscape of cross-border remittances has undergone a significant transformation over the past few
decades, moving away from being high-friction, expensive, and low transparency to being near real-time,
more cost-efficient, and more transparent.
The advent of digital remittance services has revolutionised this landscape. To enable this evolution, the
payments industry continues to make significant strides in the types of innovative solutions, the various
use cases, and the speed and costs of remittance services. This shift is reshaping how money is sent and
received globally, impacting millions of lives and economies.
The Digital Transformation
Digital remittances are now at the forefront of the industry, driven by advancements in mobile
technology and connectivity. Visa’s “Money Travels: Digital Remittances Adoption” Report found that
digital remittances are the preferred method among consumers across all surveyed countries, with 53%
of consumers turning to digital apps to send and receive funds around the world. According to the World
Bank, digital remittances are nearly 2% cheaper than cash remittances, which is a significant saving for
those sending money cross-border on a regular basis.
The benefits of digital remittances extend beyond just cost savings. These platforms offer speed, security,
and convenience, ensuring that funds are transferred quickly and safely. Of the estimated 200 million
migrants who send funds to their collective 800 million family members back home, many are turning to
digital methods, because app-based digital payments are considered the most secure means for sending
funds abroad1. This is particularly crucial for families who rely on remittances for everyday needs like
food, education, and medical expenses.
Economic and Social Impact
When these payments are digital, they provide an additional boost to economic empowerment and
financial inclusion. With advances in digital payments, families benefit from the lower cost of sending or
receiving money abroad. They can have money available in near real-time so that they can spend it
immediately on what they need. With the right guardrails in place, remittance firms and lenders can
work together to extend credit based on customer behaviour, increasing access to financial services that
immigrants lack when they first move.
While remittances can improve the living conditions of those back home, they also fuel growth rates of
receiving economies. 29 countries received over 10 percent of their gross domestic product (GDP) in
remittances in 20221, while seven received over 25 percent of their GDP this way2.
Future Prospects and Challenges
Despite the advancements, challenges remain. Many payment corridors still lack basic infrastructure like
electricity and internet connectivity, which is a barrier for millions in digitising their cross-border
payments.
Innovation within Fintechs and banks, the transformation of global remitters and capabilities of solutions
developed by global payment networks are focused on helping to bring seamless, secure, and rapid
digital remittances within reach. Expanded choices are also important in how digitally enabled migrant
workers can more easily compare providers and costs to choose the best options for their families. Visa
Direct, Visa’s real-time money movement network, is powering many of these new solutions by helping
facilitate the fast delivery of funds directly to cards, bank accounts, and wallets around the world3.
The evolution of cross-border remittances from traditional methods to digital platforms has had a
transformative impact on global economies and communities. As digital adoption continues to rise, it
holds the potential to further empower individuals and drive economic growth, provided the challenges
of digital infrastructure are addressed. The future of remittances is undeniably digital, promising greater
efficiency, security, and inclusion for millions around the world.
1Money Travels: 2023 Digital Remittances Adoption Report (visa.com)
3 Actual fund availability depends on receiving financial institution and region.
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Interview with Leon Isaacs from DMA Global | IPR Global 2023
We interviewed Leon Isaacs, the CEO & Founder of DMA Global, during our Innovation in Payments and Remittances (IPR) Global event, to share his insights into FinTech regional hotspots, the future of RegTech in Africa and the Middle East, what sets IPR apart and more.
Leon holds over 30 years’ hands-on experience and is a business leader in the payments and international development fields, with a particular expertise in migrant remittances.
Watch the full video to find out his views.
Payments Rewired: Blockchain’s Impact on Remittances | IPR Global 2023
In this instalment, we traverse the corridors of Open Banking’s impact on cross-border remittances, harnessing AI’s potential for efficiency, and navigating the realm of blockchain-based solutions. Buckle up for an insightful session through the dynamic intersection of finance, technology, and innovation.
Moderator
- Lindsay Lehr, Managing Director, PCMI
Panellists:
- Walter D’Cruz, Director, Moneo Solutions
- Sukhi Srivatsan, Head of Account Management, AZA Finance
- David Lambert, CEO, Paycross
How does open banking facilitate cross-border remittances and interoperability between financial institutions?
Let’s first understand what open banking is before diving in. David summarises it as an instant domestic bank transfer system. This essentially allows third-party entities access to users’ financial data via APIs, enabling them to make payments on behalf of the user. Walter expanded on this, emphasising how real-time payments and data exchange are subsets of open banking. He highlighted the challenge it poses to direct debit and recurring payments, especially in merchant-initiated transactions.
David also shed light on Open Banking’s potential as an alternative payment method by making instant payments by just scanning QR codes; however, he notes its limited spread in the market. Drawing parallels with established systems like PayPal or Apple Pay, he stressed the need for better branding and consumer familiarity to propel Open Banking into a mainstream payment method. Moreover, the discussion linked Open Banking to Central Bank Digital Currencies (CBDCs), foreseeing their role in accelerating international payment rails for faster digital currency. However, concerns were raised about CBDCs being entirely under central banking control, prompting potential government involvement due to public apprehension.
How can AI be leveraged to enhance the accuracy of remittance transactions and improve the user experience?
Sukhi highlighted critical pain points faced at AZA Finance when it came to liquidity projection and forecasting for their clients. Addressing the need to ensure sufficient currency availability at the right time and place without inflating costs for clients. To tackle this, they created an internal model that utilised historical client data to predict future growth patterns, aiding in better preparation for customer demands and enabling proactive measures such as potentially offering increased liquidity when moving to new markets.
However, David expressed scepticism about the reliability of predictive AI for precise forecasting. He highlighted the limitations of AI, emphasising its dependence on the data it’s fed and its inability to independently form entirely accurate projections due to various external factors influencing trends. He believed AI must be heavily controlled, such as by setting rule parameters and cautious utilisation, to prevent misleading or inaccurate predictions.
Acknowledging this, Sukhi agreed that human involvement was crucial. While AI forecasts might not be pinpoint accurate, they allow for better-informed decisions.
Walter countered common fears around AI. He emphasised AI’s role in expediting data analysis by enabling quicker translation of data into actionable insights, thereby saving time and effort. Walter advocated for a practical approach, distancing from rigid rule parameters, which is especially beneficial for small to medium-sized enterprises (SMEs) that often struggle with sourcing and analysing multiple data sources to make informed decisions. This flexibility allows smaller businesses to compete and innovate alongside industry giants.
What are some real-world examples of successful blockchain-based remittance solutions?
Walter sees blockchain as a global equaliser capable of transferring value across boundaries in real time. However, he underscores the importance of recognising blockchain independently from central bank digital currencies (CBDCs) and cryptocurrencies, as they still involve inherent complexities like exchange rates and associated costs. However, the challenge of decentralisation may be difficult for society to embrace.
David, on the other hand, points out a fundamental issue: the persisting limitations in the speed of money movement due to technological and regulatory barriers. He notes that blockchain doesn’t inherently address this challenge, especially with governments increasingly advocating for CBDCs, which introduces another layer of complexity and opposition.
Furthering the conversation, Walter delves into the intricacies of technological efficiency. He cites an example of banks implementing cheque scanners to streamline verification processes, yet this technological enhancement didn’t significantly impact on the time taken for the money to be deposited into bank accounts. This prompts doubts about the effectiveness of new technologies in speeding up financial transactions. There is the possibility for a potential paradigm shift if major retailers, such as Amazon, embed cryptocurrencies. There is also an opportunity for the adoption of blockchain within the remittance industry; however, there needs to be collaboration among stakeholders to lay down a functional framework and process. This collective effort is crucial to overcome the hurdles and ensure a more meaningful integration of this technology into the financial landscape.
What next?
At RemitONE, our commitment is to provide you with cutting-edge technology, compliance solutions, and expert guidance to navigate the ever-evolving landscape of remittances. Whether you’re just starting out or looking to scale your business, we’ve got you covered.
Want to see how RemitONE can elevate your business? Book a free consultation with our experts today!
Innovation in Payments and Remittances (IPR) Awards 2023
RemitONE is delighted to announce the winners of the 2023 Innovation in Payments and Remittances (IPR) Awards.
Start-up of the Year Award 2023
Winner: PayOnlime
Honourable mention: Lollicash
Scale-up of the Year Award 2023
Winner: Clear Junction
Honourable mention: Remit Choice Limited
Leader of the Year Award 2023
Winner: Jones Amegbor, Founder & CEO (PayAngel)
Excellent Customer Service Award 2023
Winner: Trust Payments & Unity Link
Innovation Award 2023
Winner: Currencycloud
Social Impact Award 2023
Winner: HelloPaisa
Honourable mention: PayAngel
All entries were thoroughly evaluated by our esteemed judges comprised of global senior experts in the payments and remittance industry:
- Leon Isaacs, CEO & Founder, DMA Global
- Kathryn Tomasofsky, Executive Director, MSBA
- Lindsay Lehr, Managing Director, PCMI
- Rob Ayers, CEO, Fintech-Advisors
- Sharon Gibson, CEO, JMMB Money Transfer
- Veronica Studsgaard, Founder & Chairman, IAMTN
After the initial assessment, the award finalists were unveiled in August 2023. This was followed by the second stage, during which the judging panel reviewed all the finalist entries and selected the winners in each category through an anonymous scoring method.
The award winners were announced at the IPR Awards ceremony during the IPR Global Hybrid 2-day event on Tuesday 26th September, in London, UK.
From Left to right pictured: (Top left) Larissa Rocha, Wayne Gould, Adel Taher, Jones Amegbor, Sohail Nizami and Joseph Lamptey. (Bottom left) George Boateng and Lindsay Lehr. (Top right) Rob Ayers and Adel Taher. (Bottom right) Sohail Nizami and Leon Isaacs.
About Innovation in Payments and Remittances (IPR)
In 2018, RemitONE launched Innovation in Payments and Remittances (IPR) to bring together various industry supply chain members to drive positive change. Through events and research reports, IPR brings together senior business leaders dedicated to enhancing the industry, enabling them to think big, share best practices, engage, learn, discover, create opportunities and shape change. With the power of collective insight, we can push innovation and industry growth boundaries and benefit from better outcomes.
The first IPR event was held in the iconic London landmark, The Shard. In 2021, due to the pandemic, the event was hosted online and attracted over 3,000 registrations worldwide. The IPR events are organised throughout the year to help industry stakeholders, visionaries and business leaders make informed decisions that ultimately benefit the consumer.
About RemitONE
RemitONE is the leading provider of end-to-end money transfer solutions for banks, money transfer operators (MTOs) and fintech start-ups worldwide. Our award-winning money transfer, compliance software products and consulting services – including MSB licensing, bank account provisioning and connections to our clients and partners – are tailored for the global money transfer market.
Organisations of all sizes use our platforms to run their remittance operations with ease and efficiency by reaching out to their customers via multiple channels, including agent, online and mobile.
For more information, or to access all the photos from the IPR Awards ceremony, please contact marketing@remitone.com
RemitONE Winners of the Remtech Innovation Remittance Solution Award at GFRID | United Nations Summit in Kenya, Africa!
We are delighted to announce that RemitONE has secured the prestigious Innovation Remittance Solution Award at the RemTECH Awards 2023 – GFRID | United Nations Summit in Kenya. This incredible achievement underscores our commitment to revolutionising the payments and remittance industry through cutting-edge solutions.
The RemTECH Awards, organised by CrossTech and held as part of the GFRID | United Nations Summit in Kenya, served as a platform to honour remarkable achievements and advancements in the fintech industry. Over three days, industry professionals from around the globe congregated to celebrate and engage in an enlightening conference.
Our success in the Innovation Remittance Solution category can be attributed to the groundbreaking tools we have developed. Notably, our Multi-Online Remittance Manager™ and Multi-Mobile Remittance Manager™ have played a pivotal role in advancing financial inclusion. These game-changing solutions bridge the gap between the banked and unbanked populations, providing greater accessibility and convenience for money transfers through our digital innovations.
We had the privilege of being assessed by esteemed judges who acknowledged the significance of our innovation. Leon Isaacs, judge and CEO of DMA Global, presented us with the award and praised our approach. He emphasised, “RemitONE has seen a problem and looked at various solutions and put them together in a way that truly works for the people who use their services or could utilise their services, which I think is innovative in many ways.”
Representing RemitONE at the event, our Managing Director of Africa, Ababacar Seck, accepted the award and delivered an inspiring acceptance speech. He reiterated our commitment to empowering clients, including banks, money transfer operators (MTOs), startups, and central banks, with innovative solutions tailored to their specific needs.
This award serves as a testament to our relentless pursuit of innovation and excellence. At RemitONE, we remain dedicated to shaping the future of the payments and remittance industry and improving the lives of migrants and their families worldwide.
To learn more about our award-winning Money Transfer Software reach out to us at sales@remitone.com.
The Silicon Valley Bank Collapse: Challenges and Opportunities in the Money Transfer Industry?
Silicon Valley (SVB) was the go-to bank for many tech startups and its recent fall has left a sense of uncertainty within the community, with many wondering if this will impact their own banks. In this article we’ll focus on the aftermath of SVB’s collapse, exploring what it means for the industry and the opportunities it offers for innovation and advancement in the payments and remittance spaces.
First, let’s backtrack to how this happened in the first place, and explore the warning signs. The foreshadowing of SVB’s downfall began with their investment in treasury bonds which later hit them with a major blow as interest rates spiked up in an attempt to slow down inflation. The unprecedentedly sharp increase in withdrawals outnumbered their deposits as venture capitalists were investing less in startups whilst customers were withdrawing their funds at an accelerated pace. This made matters worse for SVB, as they had to provide the funds to compensate for the loss, and in desperation, they sold their bonds at a much lesser value, resulting in a huge loss of $1.8 bn.
What effect has this had on the money transfer industry?
Challenge #1: Slower Operations and Increased Costs
SVB’s collapse caused considerable hindrances for payroll, resulting in delayed or unpaid payments to employees. This also may have led to a shortage of staff and disruptions to money transfer companies’ day-to-day operations, leaving businesses understaffed and unable to resolve customer issues or complaints.
As a result of these setbacks, customers may have experienced missed or delayed transfers, which must have had a serious impact on the customer’s trust and confidence in the money transfer market. Businesses may have suffered from a decline in transaction volumes and revenue slowdowns as a result.
Solution #1: Rebuild Customer Relationship
Money Transfer Operators (MTOs) must win back customer trust. They can achieve this by investing in a secure and scalable technology platform that is built on a robust infrastructure. Additionally, offering a range of services beyond simply money transfers (e.g. utility bill payments, wallet transfers, airtime etc), can also help gain customer trust.
MTOs can also strive to offer even more competitive rates and lower transaction fees, which not only attracts new customers but helps retain trust with existing ones. Cost reduction can happen by investing in technology that automates processes and compliance procedures and opens up new revenue-sourcing channels such as mobile apps and online portals.
Challenge #2: Difficulty for Immigrant Communities
The remittance market thrives hugely on transactions by immigrants who send money to their home countries.
With the exit of some smaller players, larger companies can gain more bargaining power to increase the costs of fees and charges; this burden is then passed onto the end customers, making it more difficult for the latter to send money to their loved ones.
Solution #2: This problem may, in fact, prompt a change in customer behaviour. For example, challenging circumstances can often push people to explore alternate routes which they may have been hesitant to use before, such as mobile money. This may result in traditional banks losing some of their dominance over digital banks, allowing the latter to gain market share, especially as they often have lower fees and are more convenient.
In addition, digital banks are continuing to gain ground in the money transfer market; this may likely continue as more people become tech-savvy and embrace its benefits. It is crucial for MTOs and digital banks to evolve and adapt to meet customers’ changing needs by monitoring the market and consistently updating their marketing strategy.
Challenge # 3: Tighter Regulation
The Federal Reserve introduced a new program to help tackle instability and safeguard companies impacted by SVB’s downfall. Similarly, this could inspire money transfer regulators to also introduce tighter rules and regulations around monitoring and tracking transactions using reliable technology platforms.
However, there are some downsides as well, including a slowdown in operations and higher costs. A rise in compliance expenses may also result in companies having to exert more money to invest in new technology or additional staff to comply with regulations. This is especially challenging for smaller companies that may not have sufficient funds. It can also lead to increased delays in transactions as agents and companies need to perform additional checks.
Solution #3: Despite these challenges, this could in fact improve compliance practices in many companies. With reliable technology platforms to enforce transactional monitoring and process automation in place, companies can reduce the risk of fraud and improve their security measures. All of these improvements will aid in strengthening the money transfer industry and allow it to become more reliable than ever.
The Outcome for the Industry: Innovation Opportunity
Despite the challenges brought about by the recent instability in the payments and money transfer industries, this situation can also stimulate growth opportunities.
As areas of weakness within businesses are revealed, a better understanding of how to improve processes and systems will also become apparent. In addition, the retreat of some tech companies will provide opportunities for new players to enter with fresh ideas, products and services. Simultaneously, it encourages industry players to collaborate in finding solutions as each can provide their area of expertise to resolve the problem, creating beneficial progress.
RemitONE and other tech providers can help companies affected by the SVB collapse.
Don’t miss out on industry insights – join our community of professionals and be the first to hear about trending topics, exciting events and more!
Contact marketing@remitone.com to find out more.
Video: Saving the Crucial Role of Agents and Banks in the Remittance Industry
Brought to you by RemitONE, the Innovation in Payments and Remittances (IPR) Global Hybrid event took place on 19-20 October 2022 and included a series of fantastic discussions.
Wallets have been on the rise in recent years which has forced banks to embrace technological advancements to keep up with the pace of digital innovations in the remittance industry. In this panel, we uncover the driving forces behind this change and the possible impact it may have on banks, agents, and the overall money transfer landscape in the coming years.
Moderator:
- Ababacar Seck, Managing Director – Africa, RemitONE
Our panellists include:
- Sharon Gibson, CEO, JMMB Money Transfer
- Leon Isaacs, Founder and CEO, DMA Global
- George Boateng, COO, Unity Link
Why are pay-out transactions shifting to wallets?
There’s been an increase in the popularity of pay-out transactions through wallets, due to their accessibility and simplicity. This upward trend is particularly prominent in Asia and Africa. For example, in Ghana, the mobile money market reached $121.8 Billion in 2022 and is expected to grow to $590.7 Billion by 2028. George believes the reason behind this is attributed to factors such as convenience, as wallets are more easily within reach than banks, and overall save time and effort.
Leon also reinforces, wallets are often preferable as they’re easy to use which means people don’t require additional assistance. Other drivers are, the senders have more options, people have become more digitally savvy and most notably, it’s cheaper. Another key benefit of wallets is their increased security due to tokenization, which is a unique identification number attached to any personal information such as account numbers.
However, it’s not the same in every region. Sharon shares that in Jamaica there’s only one institute that offers mobile wallets, but that could change very soon. The recent launch of CBDC can possibly encourage more institutions to embrace digital wallets.
How can banks and traditional agents cope in the digital era?
Leon states in many cases it’s rare for agents or banks to be solely a remittance business. While they may have their core purpose, they should adapt and diversify their services to progress ahead in the competitive market. Sharon suggests that banks can collaborate with more agents to offer their products and services and satisfy client needs, however, there need to be adequate technology capabilities in place for it to be a success.
Data shows that customers prefer the physical contact of agents as they instil trust and provide clear guidance when a problem occurs, as opposed to communicating with a bot. A study even found that 64% of customers commented that they could not solve a problem when using mobile apps to transfer money. Overall, agents play a crucial role in building customer trust and loyalty especially as a large proportion of transactions are still carried out in stores and not through digital means, which proves they still hold a strong position.
There are different considerations for the send and receiving end for agents. The pandemic did accelerate a surge in people adopting digital payments and transactions which resulted in a lesser need for people to visit agents, and it’s likely that this will continue. As for the pay-out side, there is potential for agents to educate customers as online accessibility varies in countries where people are still hesitant about online banking and money transfers – this creates a good chance for agents to bridge the gap by acting as the intermediaries between clients and digital payments. Customers already trust these agents, which makes it more probable for them to adopt changes with the agents’ help.
Leveraging technology is another technique agents can utilise to enhance efficiency and strengthen their role further. For instance, many people have formed personal relationships with agents but sometimes lack financial literacy. In such cases, agents can take advantage of innovations such as card readers to increase customer security and reinforce the trust clients have in them. This can solidify the bond between the agent and client as well.
MNOs are taking over transactions led by banks, is this healthy? What does this mean for the future of final inclusion?
There is no denying that competition drives innovation and MNOs gaining the lead has pressured banks to also step up their game to progress ahead. MNOs often educate the underbanked on how to use their products, an area where banks are lacking. There’s also greater flexibility with MNOs, as people can instantly access their digital funds from the comfort of their homes without the need for documentation and physical visits to the bank, helping them to save precious time.
MNOs particularly boast a good distribution of agents across both send and pay-out. However, their products excel in locations where there is a vast digital presence (although they still have a huge potential to increase penetration of financial services, which will continue to encourage financial inclusion). In locations where there is good digital infrastructure, the need for agents to pay out cash is also lessened, this creates a window of opportunity for them to diversify their products and services. One example is M-pesa in Africa, where digital wallets are the primary method of payment. As a result, customers rarely use physical cash, which suggests that people will only need to visit a branch for a specific need unrelated to money transfers or cash-outs.
The changing face of remittance clients requires a new approach, how can MTOs keep on top of the needs of clients and how will this affect the business model?
In contrast to the past, migrants are more skilled individuals and therefore less reliant on agents, demonstrating increased digital literacy. As a result, the power balance has shifted to the customers, with the internet providing easy access for them to quickly switch to other companies if they are unsatisfied with the service.
Clients also tend to focus more on convenience, such as banking being available everywhere at any time and more demand for receiving immediate results. This places a heavy burden on banks – they often have to increase their costs to expand their workforce and enhance their operations more robustly. However, with the increasing popularity of social media, email, live chat and phone, it becomes challenging for the banks to meet the demand – this can lead to dissatisfaction, complaints and negative reviews, overall damaging the brand’s reputation.
To minimise this problem, Sharon proposes a collaborative relationship between banks and agents, to exchange knowledge and expertise and gain a thorough understanding of the client’s needs. Leon explains that companies need to rethink their strategies to maintain a close connection with clients whilst keeping pace with their changing needs. However, a positive takeaway is that customers are benefiting from having their needs finally met and the industry continues to thrive.
Can technology help agents preserve their role?
Whilst technology can be costly, it can be a useful tool to streamline operations more effectively. One way is gathering accurate data in a more interactive way instead of relying on traditional surveys. Social media platforms like Twitter polls can help analyse consumer behaviour, identifying factors which motivate them to pick specific agents over others.
As the rapid surge of digitalisation continues, more businesses are having to adapt. At RemitONE, we play a pivotal role in helping banks shift to the online realm. Our software empowers agents to provide customers with user-friendly portals whilst providing an array of options for them to choose from, such as airtime top-ups, prepaid card services and more. By utilising our industry-leading software, you can increase your transaction rates whilst maintaining top-notch security through our AML and KYC checks. This results in a seamless process from send to pay-out. You can also gain access to our global network of clients and partners that we have built over decades for you to access right away, saving you time, cost and headache.
Interested in powering up your business? Get in touch with our experts to provide your customers with a secure, convenient, and exceptional money-transfer experience.
Tap into our experts and schedule a free consultation.
References
https://www.imarcgroup.com/ghana-mobile-money-market
https://www.westernunion.com/blog/en/leery-of-how-digital-wallets-work-let-us-break-it-down-for-you/