Remittances serve as a lifeline for a huge number of people worldwide, and their use looks set to increase as digital transformation reshapes the overseas transfer of money1.
Global remittances totalled $706 billion in 2019, with 200 million workers sending remittances to one out of every nine people on the planet1, according to United Nations estimates. While remittances are not a new phenomenon, digital remittances are fast reshaping how workers send money. According to the World Bank, remittance corridors with digital payment options have increased every quarter since 20161.
Just a decade ago, money transfers took place on a much smaller scale, often through brick-and-mortar establishments where senders paid in cash. For established brands, digital was rarely considered, as it presented only a tiny percentage of revenue and transactions, around 2% in 2011 for one of the market leaders2.
But the COVID-19 pandemic propelled digital remittance’s growth in a way that was perhaps unimaginable. Around four years’ worth of digital expansion was compressed into two months. Many incumbent institutions and newer fintechs have since invested in improving their digital operations and experienced growth as a result.2
The potential for further growth in digital remittances is massive. And as more people shift to digital and find they have a greater choice of providers, their expectations will likely grow in tandem.
Money transfer companies in this space have plenty of opportunities to expand. The race is now on to capture new customers, not only with better rates, but also by providing more efficient, convenient services.
A new generation of moving money
Consumers have sometimes seen money transfers as frustrating and expensive experiences that include many middlemen, hidden charges and lengthy remittance times for receivers.
For example, of the $16.3 billion in fees paid by American consumers and small businesses in 2019 on international payments and remittances, well over half was hidden in inflated exchange rates3.
There is international pressure to reduce fees. The UN has set a target for retail businesses facilitating remittances to charge no more than a 3% fee4, and the shift to digital and market expansion has the potential to remove some of the previous frustrations.
New providers are shaking up the market by combining low rates with more reliable5, fast and simple ways to securely send money across borders. These are money transfers that can be performed instantly, through automation and highly efficient6 digital processes, making the entire experience more customer-friendly.
Increased competition means that enhancements to customer experience will likely prove major differentiators in the future.
This, in turn, contributes to an increase in consumer expectations. Consumers have become accustomed to speed, price transparency and the ability to track goods and services in real time in other areas, such as retail, creating an expectation that money transfer businesses will adapt to meet similar standards. Incumbent providers are having to revisit their operating models in order to keep up with rivals new and old and to find ways to exceed expectations in the constantly changing digital landscape.
Solutions are out there
How can money transfer businesses and fintechs unlock a better digital remittance experience? The key is selecting the right partner, ideally one that can facilitate both technical advancement and improved customer experiences.
In-house payments infrastructure is certainly an option for organizations with the necessary resources to create and implement it. However, for the majority of businesses entering or expanding in this market, it could be more cost-efficient and faster to work with a partner that already offers the payments infrastructure that allows for digital remittances.
Advancing the quality of your money transfer offering should include implementing the fast, easy, near-real-time payments that customers increasingly expect. Partnering with a payment provider like Worldpay from FIS® could help you remain on top of the rapid market change.
Bankout from Worldpay powers the payment of people and businesses in over 155 markets and 99 local currencies, with transfers made quickly and easily.
In addition to Bankout, we also offer other solutions to suit the increasing demand for improved customer experience.
Whichever technology they select, providers wishing to succeed must keep their fingers on the pulse of developments in digital remittances. With that in mind, staying up-to-date and ensuring a seamless customer experience will be crucial to future growth.
Get in touch with Worldpay from FIS® today to find out more about how our products can help set you apart from the competition to help you stay ahead of the curve.
1 Visa Economic Empowerment Institute (2021) The rise of digital remittances: How innovation is improving global money movement [Accessed 09/12/21] https://usa.visa.com/content/dam/VCOM/global/ms/documents/veei-the-rise-of-digital-remittances.pdf
2 Forbes (2020) How Money Transfer Companies Squeezed Four Years Of Digital Growth Into Just Two Months [Accessed 09/12/21] https://www.forbes.com/sites/danielwebber/2020/05/28/how-money-transfer-companies-squeezed-four-years-of-digital-growth-into-just-two-months/?sh=7141f7f1a7b6
3 Fortune (2021) Over half of global payment fees are hidden in inflated exchange rates. That can be fixed [Accessed 09/12/21] https://fortune.com/2021/08/01/remittances-global-international-payments-fees-abuse/
4 Voice of America (2021) UN Calls for Better Remittance Services at Lower Cost [Accessed 09/12/21] https://www.voanews.com/usa/un-calls-better-remittance-services-lower-cost
5 FinTech Magazine (2020) Redefining remittances: FinTechs during COVID-19 [Accessed 09/12/21] https://fintechmagazine.com/digital-payments/redefining-remittances-fintechs-during-covid-19
6 Financial Times (2021) Lex in depth – remittance fintechs herald a payments revolution [Accessed 09/12/21] https://www.ft.com/content/1f11b38b-54d6-451c-ba4b-48843efa329d