How digital remittances can help unlock economic empowerment
An estimated 800 million globally1 rely on remittances to pay for essentials like food, healthcare, and education, making these payments crucial for the global economy at large and the prosperity of developing communities around the world. According to World Bank and KNOMAD, 29 countries received over 10% of their GDP in remittances in 2022, while seven2 received over 25% of their GDP this way. Sending funds across borders by traditional means, however, can still take days to complete, and present cost and security challenges. Digital remittances, bolstered by an increasingly interconnected world, have the power to help.
Remittances require a nonstop network that can quickly and securely move money, ensuring that the recipients have funds in hand to make everyday purchases and pay for their basic needs. Visa’s recent global study on digital remittance adoption identifies the progress – and barriers that remain – in how money travels abroad.3 The data reveals that sending more money, more often, is easier than ever and that consumers truly see the future as digital. Yet remittances represent one of the most fragmented financial service sectors for user experience, technology, and economic models.
The emergence of digitalization has proven to help solve remittance challenges, offering new business models and global network capabilities that can bring speed, transparency and cost savings for people who depend on them. Digital remittance adoption is moderately high across the U.S. and Canada. 60-70% of surveyed remittance users across North America have used an app-based digital payment method to send/receive money internationally, whereas only 10-15% of surveyed U.S. remittance users rely on cash, checks, and money orders.4
Research from the Visa Economic Empowerment Institute highlights the rise of digital remittances and demonstrates the power of choice — digitally enabled migrant workers can more easily compare providers and costs to choose the best options for their families while ensuring their money gets there fast.5 Collaboration from the private and public sectors can advance digital enablement worldwide even further.
The digital path to economic empowerment
Digital enablement goes beyond holding a digital wallet or account – it’s an ecosystem that allows people to receive and spend their money through digital channels. The notion of digital spending sets the new era apart from traditional means of remittances, where the process ends once cash is withdrawn. Digital services can provide individuals and businesses with access to resources, information, and tools that can enhance their financial well-being, and help them save into a secure digital account.
While digital adoption is on the rise, many underbanked families worldwide still rely on cash because businesses in their communities have limited digital payments infrastructure. While North America has the internet connectivity and technology infrastructure that digital remittances reply on, funds often travel to more remote places that do not.
Today, more than 85 percent of the world’s population owns a smartphone, making digital money transfers easier than ever.6 Respondents in both the U.S. and Canada — 35 percent — report that they believe app-based digital transfers are the most secure for receiving money and the industry has ample capabilities to push innovation and digital transformation. Not to mention an app-based digital transfer would alleviate many of these concerns about speed, convenience, and cost. Given the world is becoming increasingly digital, how do we ensure we meet the diverse needs of consumers? The answer: Collaboration between public and private sectors to provide more choices and options that align with consumer preferences and circumstances.
Unlocking the benefits of remittance innovation for everyone
Remittances are viewed through two lenses: sending and receiving. Private-sector innovation can continue to make strides by creating technology that will allow for lower-cost funding and transfers at higher speed and transparency. Both private and public sectors must work together to advance digital enablement. Here are a few areas I envision we can make the most improvement:
- Engage in public-private dialogue and partnerships. There is widespread recognition that governments, non-governmental organizations, and the private sector need to work hand-in-hand to close the digital equity gap and ensure secure, reliable, and fast remittances are available to everyone everywhere.
- Harmonize regulatory environments. Remittances and other cross-border payments are subject to regulatory regimes that can add friction and complexity. Harmonizing and aligning rules as much as possible can streamline the process for everyone.
- Prioritize open interoperability. There is a clear need for a global, interoperable payments platform that is fast and reliable, and that allows service providers to transfer funds from an originating account to a recipient account via card (using a 16-digit primary account number) or bank account (using routing or account numbers). It also needs to handle multiple use-cases and provide strong risk controls, security management protocols, network reliability and settlement or exceptions handling services—with gateways to global card networks, as well as to local debit, Automated Clearing House or Real Time Payment schemes.
Money movement is personal. And as we strive to enhance digital enablement globally, my own experiences come to mind, as I’ve experienced firsthand just how important these lifeline payments can be. When I immigrated to the U.S. from the Dominican Republic as a student 25 years ago, I relied on my parents sending money overseas. I recall hurdles I faced, not knowing how much ultimately would be deposited after fees and when I’d see the funds. And despite the enormous strides made in the digital remittances space since then, many families continue to encounter challenges and roadblocks. However, by establishing a comprehensive digital ecosystem, and with the help of innovative technologies like Visa Direct, we can extend the reach of digital remittances to millions worldwide who rely on them.
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1 United Nations News, Remittances matter: 8 facts you don’t know about the money migrants send back home, (2019, June).
2 Countries include: Honduras, Kyrgyz Republic, Lebanon, Samoa, Tajikistan, The Gambia, and Tonga.
3 Money Travels: 2023 Digital Remittances Adoption, March 2023; conducted by Visa and Morning Consult during December 14-28, 2022 among a sample of remittance senders and receivers across the U.S., Canada, Mexico, Peru, France, Poland, the Philippines, Singapore, United Arab Emirates, and Saudi Arabia.
4 Money Travels: 2023 Digital Remittances Adoption Report.
5 Visa Economic Empowerment Institute, The economic empowerment of digital remittances: How to unlock the benefits of innovation and competition. Harper, C., & Rakkappan, R. (2022, October).
6 Statista, Number of smartphone users worldwide from 2013 to 2028, J. Degenhard, (2023, August), https://www.statista.com/forecasts/1143723/smartphone-users-in-the-world.
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