According to a World Bank report, India was the top remittance recipient in 2018 with USD79 billion. The report estimated that in 2019, “remittance flows to low- and middle-income countries are expected to reach USD550 billion, to become their largest source of external financing”. In other words, countries, especially developing ones, benefit greatly from remittance flows.
But there’s a price. Another report, “RemitSCOPE – Remittance markets and opportunities – Asia and the Pacific”, noted that while “remittance contributed to Asia Pacific more than 10 times the official development assistance to the region”, and that “an estimated 40% of remittance flows went to rural areas”, the data was “disproportionate to countries with a majority of rural areas”.
This, according to the report, was because remittances to rural areas were generally costlier because of the complexities involved in providing access points in remote areas. This means those who need help the most are ironically facing the biggest roadblock.
Before we suggest a solution, let’s understand the two stages of remittance.
Outward remittance is what usually comes to mind when we talk about remittance. It is the process whereby a worker sends money back to their home country. Where there is outward remittance, inward remittance must follow. It refers specifically to the part of the process where a country receives remittance funds from without.
In the last article, we recommended cost consolidation as a way for firms to cut cross-border transaction costs. That is more relevant than ever given that the same World Bank report concluded that banks were the most expensive remittance channels at 11% in the first quarter of 2019.
But what is the most effective way to reduce remittance costs (lowering it to 3% by 2030 is a Sustainable Development Goal)? This article suggests employing third-party payment facilities with the latest fintech capabilities that can form a bridge across the two stages of remittance.
Why? Using Tranglo as an example, its network spans thousands of pick-up points all over the world, with 24/7 single or mass payouts to several countries for the ultimate convenience. Tranglo’s model is also extremely scalable and fully integrated. This allows money transfer operators/consumer-facing businesses to cut operational costs, which translates to lower remittance fees. Everybody wins.
Sending money across borders is very common. The trick is doing so through reliable and affordable remittance services. Together we can ensure that cross-border payments, in particular inward and outward remittances, are accessible to the masses. Connect with us to know more.