Business

REMITTANCES EXPLAINED: How funds are transferred across borders, and why digital is poised to disrupt this century-old industry

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2 min read
  • Remittances — primarily payments sent by foreign workers to their relatives back home — is a massive global industry that digital players are just beginning to disrupt. $583 billion was remitted globally in 2014, according to estimates from the World Bank.
  • The remittances industry is a highly imbalanced one, with certain countries dominating send volumes and others dominating receive volumes. The US sent 22% of global remittance volume last year, and India received 12% of global remittance volume.
  • Different types of companies offer remittances, but it is money-transfer operators (MTOs) that primarily focus on these cross-border transfers. Banks actually dominate the remittance market, while MTOs, including Western Union and MoneyGram, have about half as much market share as financial institutions.
  • Digital players are finding an opportunity to update the remittance model and gain a foothold in this industry by lowering overhead costs and passing savings on through lower fees. Digital-first MTOs use mobile and online channels to send money, bypassing costly agent-send networks. They also use more efficient and cost-effective computer modeling to meet compliance standards.
  • Sizes the remittance market and assesses total revenues earned through facilitating cross-border transfers
  • Examines which markets and regions are the top for sending and receiving of remittances
  • Lays out the different types of companies offering remittances and why certain players dominate the industry
  • Unpacks the challenges to facilitating remittance, including sociopolitical instability and major compliance burdens
  • Considers ways digital-first startups have begun to disrupt remittance companies and bring down fees
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Published April 19, 2016

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