Wednesday, June 19, 2024
HomeFinanceIt’s time to reinvent remittances! 

It’s time to reinvent remittances! 

With a focus on revolutionizing the long dormant financial sector, FinTech is creating new applications to meet a rapidly changing landscape, and the tipping point to the use of these technologies is in remittances, a key chokepoint to the transfer of monies, locally and globally.

Add the increasing migration of populations, the need to send and receive monies across all currencies, and FinTech will continue to deliver ‘gotta have’ solutions to remittances.

FinTech brings security and opportunity

Historically, remittances represent a payment to another party, sent by new migrants working or studying abroad to their families back home. Today, with increased migrations, the global growth of online digital remittances has the potential to bring greater financial security and economic opportunity to millions of ordinary people.

Much like all the recent changes in the way we bank, digital remittances are a vital part of keeping the flow of currencies fast and secure. For developing countries in 2019, the transfer of remittances to low and middle-income countries was estimated be valued at over $550 billion. That’s a sizable chunk of global GDP. The pandemic increased the need for trusted and speedy solutions, and FinTech evolved by leaps and bounds to handle a quarantined world struggling to keep business afloat and keep populations secure.

Remittances make up an enormous amount of developing countries’ economies. For example, The Philippines relies on remittances for 12% of its GDP, according to the Asian Development Bank. India is the largest recipient, receiving around $87 billion dollars a year.

The growth of smart phone usage provides a valuable tool for digital remittances. In Nigeria, the number of smartphone users will hit over 140 million by 2025. The spread of this sophisticated hardware is that both individuals and wider economies can benefit from an increase in online remittances.

But, still, as of today, where digital remittances should be the standard practice, old behaviors are hard to overcome. 95% of migrant recipients still receive their remittances in a bank account or cash, with just 5% going to mobile wallets. With all the benefits FinTech and digital remittances offer this audience, the time is now to encourage behavior change.

FinTech is the global currency technosolution

The technosolution that FinTech brought into play was not just the frictionless movement of currencies, but reduced complexity and costs.  For too long, banks were the only way to send and receive currencies, with less than transparent menus of charges: transaction and processing fees, commissions, FX spreads, conversion rates and more. But with sophisticated FinTech solutions, Money Transfer Operators (MTOs), can offer transfers at a significantly lower cost. Lowering the fees migrant workers pay to send money home could result in $1 billion more being spent on education in developing countries.

This is a game-changer. FinTech has made global remittances faster, more cost-effective, and accessible, and been able to eliminate the high costs of complex legacy systems.

Of course, what goes fast must slow down, and today’s remittance market is reaching a level of saturation. With the recession, Venture capital monies are tight. This creates more competition amongst the legacy FinTech solutions (in tech, no one wants to be known as legacy!) That should result in increased innovation as FinTech’s morph into “super-apps” as they add more offerings and absorb AI and blockchain to do so.

Tech reinvents itself according to need, and FinTech’s will continue to advance, working with 2030 Sustainable Development Goals to reduce average remittance fees below 3%. Add to that the speed of globalization, and there will always be new territories for FinTech’s advances.

Change demands flexibility and ingenuity.

The world is undergoing massive change.  The war in Ukraine and the evolving pandemic recovery remain big concerns. The World Bank saw an 8% jump in remittances to Ukraine as money was sent to support families during the war. Covid-19 has led to a 14% shrinking of remittances as global migration slowed. But the pandemic has also led to a shift in the model of transferring cash to one that is now almost 50% digital.

Remote working has also increased the need for new solutions. Younger generations can now move to new countries to work remotely, which could lead to money moving in unprecedented directions. International migration patterns will create new payment corridors and make way for local innovators to partner with legacy FinTech’s to create more integrated cross-border payment ecosystems.

Competition, shifting populations, AI and blockchain, and the desire for increased global prosperity will challenge FinTech to drive towards new solutions now and for the imaginable future. Money transfer specialists will continue to have to investigate and invest in new solutions to keep up with our rapidly changing world.


Howard Davidson is the CMO at AlmondFinTech.

Almond FinTech is a blockchain-based funds transfer network connecting financial institutions globally. Almond’s infrastructure is built for speed, security, and accessibility, enabling users worldwide to send money across borders using their existing financial institutions. Additionally, Almond uses a combination of psychometric and financial data to provide fast, low-risk, ethical loans to communities with unconventional or limited credit histories.

This article was written by Howard Davidson and compiled by Tobi Loba.

Tobi Loba
Tobi Loba
Tobi Loba is a passionate writer with a vast interest in the stock market. She joined the crypto ecosystem about three years ago and has written lots of ebooks and articles in relation to cryptocurrency and blockchain projects. Tobi Loba earned her degree at the University of Ibadan.

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