The advent and substantial growth of FinTechs as Money Transfer Providers in the Financial Services payments industry has led to the reduction of overall remittance costs and as a result, brings much anticipated benefits to the lives of remittance senders and receivers.
Looking at some statistics, in regard to remittance and international migration, it can be seen that, out of the 258 Million people living outside their native country, over 200 Million of them sent money home, estimating a value of US $480 Billion in 2017 . Subsequently, according to the World Bank, in the year 2019, the global remittance received was over US$653 billion.
In current U.S. dollar terms, 2019 identified the top five remittance recipient countries as India, China, Mexico, the Philippines and Egypt. However, when looking at remittance volumes as a share of Gross Domestic Product (GDP) for 2019, the top five remittance recipient countries are smaller economies: Tonga, Haiti, Nepal, Tajikistan and the Kyrgyz Republic.
Much to the credit of FinTechs, the Remittances Prices Worldwide (RPW) report highlights that the global average total cost for sending US $200 (remittance cost) has decreased from close to 10% in 2008 to around 6.84% in 2019. This figure is still above the Sustainable Development Goal (SDG) target of 3%by 2030.
Sustainable Development Goal (SDG) 10.C.1 aims to reduce the global average cost of remitting $200 to below $6 on average by 2030, times of increased uncertainty, like now, make it difficult for Remittance Service Providers to set the foreign exchange rates confidently due to the volatility in foreign exchange market.
This results in higher foreign-exchange-related fees combined with the higher operating costs, arising from operational disruptions, which may result in increasing remittance prices in short term.
The World Bank expects the growth of remittance to rise by 5.6 % in 2021 and the economic situation to improve at some level in various regions. Although the improvements might not immediately compensate the losses witnessed in 2020, they may eventually help the Continents recover from a downfall and progress steadily to a much more stable economy.