Cross Border remittances  – CBR expected to raise about $0.8 trillion USD. Numbers here are really big and yes this is a big deal. But since most of the world’s population now has access to the Internet or mobile phones, it is just a matter of time before the scales tip to primarily digital versus in-person remittances.


Cross Border Remittances & Mobile Payments

It is mostly an area of financial services that goes wholly unnoticed except by the population that use and rely on it. The remittance business is massive and massively important to the individuals and the countries that receive them, but in the face of other retail payments innovation CBR does not comes out well in-spite such an important factor to the economies of many African and Asian countries.

As per the report from the internet on Cross Border remittances. In 2015, $582 billion (In the form of Cash remittances) was sent by migrants to relatives in their home countries. Of that total amount of $133.5 billion originated from the United States of America.


Remittances it is believed to increase the money supply and stimulate demand for consumption and investment. Innovative competitors are entering the market with alternative remittance models. Innovative channels like internet, mobile money wallets, mobile banking and social networks are being used. Sometimes even combinations of mobile money and virtual currencies, or repurposing the remittance payment rails.

The new digital business models encompass the benefits of cost, customer experience, and convenience. These emerging trends are poised to put consumers back in control of their money. Innovative ways of remittances shown the opportunity of remitting beyond money or cash.


Blockchain – A Diva for Cross Border Remittances

Blockchain can reduce cost, increase speed, provide much better security and extremely low loss of exchange. Remittances play a very important role in eliminating poverty of a nation. The below description are some of the fundamental beliefs that determine the shape of the industry in different markets.

The real success of International remittances depends upon product excellence, affordability, Convenience i.e ease of use, Reliability, customer trust and speed. Remitting goods, services and professional services are now on mind and need of the time.

The high rate of economic growth leads to a sustained increase in the productive capacity of the economy through productive policies, which in turn leads to increasing employment opportunities in the country. This process allows a progressive absorption and integration of the unemployed and under-employed including skilled and un-skilled into expanding economic activities with high levels of productivity.

In the process, the poor may be able to achieve increment in their incomes through existing employment or shift to new jobs involving higher skills on higher wages. Money transfers are one product in a larger customer relationship. Successful financial institutions have a real commitment to this customer relationship.


Unbanked, Underbanked and Mobile Money Subscribers

Innovation is also needed to meet the challenge of unbanked and underserved populations. Transfers can be initiated at an agent, bank branch, Mobile handset, ATM, telephone call or online customer can transfer unlimited amounts for costs around 5$ (package) per transfer (depending upon the country)

An international remittance is a cross-border, person-to-person payment of relatively low value and with the highest quality to provide an excellent experience to sender and receiver.

Quality” means speed, reliability, security, and convenience. New technology may enable better quality at lower cost but typically there is a trade-off. For remittances, low cost may often be the most important thing. Typically by migrant workers to their families. Especially from developed to developing countries money needs to be remitted; person-to-person, low value – ie not commercial or wholesale payments.


Domestic remittances also exist Recurrent – but typically made by individual transfers. For remittance service providers (RSPs), often indistinguishable from any other retail cross-border transfers. Success in the remittance business is measured by our ability to attract the customer’s wallet share over his lifecycle. Safe alternative to mailing a cashier’s check or money order. Funds in the remittance account are FDIC-insured until transferred to the Remittance Network Member bank.


Regulatory Framework – A hurdle for CBR

On the side of the regulatory framework, the central bank’s mindset and controls or too many controls and framework can increase the cost of formal remittances. Technology is the primary factor to reduce cost and to have competition as far as possible as the second important factor. The principles are not a call for remittances to be regulated. Sometimes it may be more important to remove existing regulation.

They do not aim to set specific service levels. Low price may often be more important than a high level of service. The purpose is to tackle weaknesses in the market that inhibit competition (including poor regulation).

The remittance business fundamentals cover different scenarios at  Macro-level is scenario is used for planning tools to map the macro environment; Fundamental Beliefs, Industry drivers and signposts and red flags. Market-level fundamentals to cover strategic benchmarking i.e. business architecture and street-level fundamentals to balanced scorecard indicators.

For Remittances either domestic or cross border i.e. international the drivers determine the shaping of the industry are; The ability of banks to match the cost and features of the informal hawala and non-bank payments businesses.

The ability of banks to form alliances with domestic banks with strong networks in the host countries, Lifecycle of consumers propensity to purchase new financial products around lifestyle needs, Scale and efficiency in managing costs, Robustness of macroeconomic growth, Freer flow of cross border money, Strong payments engine and Cost of acquiring the customer.

The excellency of remittance can turn zero-balance overnight sweep account that allows the remitter to send funds to family and friends. Beneficiary claims funds from one of the locations by accessing their account in the store by check, through an ATM, Mobile or online and no checking or savings accounts required. A bank account is not mandatory in today’s time neither the monthly or annual account maintenance fees. No monthly remittance limits beyond the daily limit and No initial deposit required.

Remittances are part of an individual’s access to financial services. A good remittance product improves value to the user in the short term and access to other financial products in the long term it also increases competition and could move transactions to the formal sector. Remittance is a cost-driven business that emulates the transfer of cash across borders.


Points to Note:

All credits if any remains on the original contributor only. We have covered all basics around domestic and international remittances, its working models and the importance of quality financial services to the masses. In the next upcoming post will talk about implementation, usage and practice experience for markets.


Books + Other readings Referred

  • Research through open internet, news portals, white papers and imparted knowledge via live conferences & lectures.
  • Lab and hands-on experience of  @AILabPage (Self-taught learners group) members.


Feedback & Further Question

Do you have any questions about Telecom, FinTech or their new enablers i.e AI, Machine Learning, Data Science or Big Data Analytics? Leave a question in a comment section or ask via email. Will try best to answer it.


FM.pngConclusion –Remittance is an increasingly important part of the economy from which we can build further programmes for our citizens overseas to grow their assets at home. The extraordinary thing about last week was what the second important piece of remittance-related news had to offer: Ant Financial Services Group of China will pay $880 million to buy MoneyGram, the second-largest global remittance firm, based in Dallas, Texas. As research has shown to be the case with cross-border remittances, even total amounts remitted are sensitive to price. An efficient domestic payment system infrastructure is key to reduce the costs of remittance services, especially in receiving countries.


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Posted by V Sharma

Technology specialist in Financial Technology(FinTech), Photography, Artificial Intelligence. Mobile Financial Services (Cross Border Remittances, Mobile Money, Mobile Banking, Mobile Payments), Data Science, IT Service Management, Machine Learning, Neural Networks and Deep Learning techniques. Mobile Data and Billing & Prepaid Charging Services (IN, OCS & CVBS) with over 15 years experience. Led start ups & new business units successfully at local and international levels with Hands-on Engineering & Business Strategy.

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