Mobile wallets, ATMs find roles in remittance market

One often neglected market in the public consciousness is remittances, where migrant workers send funds earned in one country back to their families in their country of origin. This market is massive, valued at nearly $630 billion in 2022, according to a press release from the World Bank.

It is also continuing to grow, as Grand View Research said in a press release. The market will reach a 10.1% compound annual growth rate from 2022 to 2030.

"There are more than 287 million migrants in the world today, and many of them send economic support home to the people they leave behind. The remittances they send have a huge impact on the lives of people in low and middle-income countries. In fact, remittances surpass foreign direct investment as a source of funding for low and middle-income countries and reached $626 billion last year," Shawn Fielder, CEO of Ria Money Transfer, said in an email interview.

These remittances both help migrants feed their families and improve opportunities for their children.

"Remittances put food on the table for recipient families and help pay for other necessities like medical care. But remittances also boost spending on education by the families who receive them by an average of 35%. Education is often the first step on the road to financial inclusion," Fielder said.

When it comes to remittances, there are a variety of tools that migrants are using to send funds, including mobile wallets and ATMs.

Mobile wallets

Migrants can make use of mobile wallets, such as Ria's mobile wallets a feature of its overall money transfer service, to send money back home through a variety of methods.

"Technological advances like mobile solutions now reach even the most remote corners of the world and are helping bring down the cost of sending remittances and speed delivery to the point where more than 90% of our transfers to bank accounts or wallets happen in real time," Fielder said. "Mobile wallets, which are widely available even in countries where most inhabitants remain unbanked, have become so robust that they can take the place of bank accounts."

With tools such as mobile wallets, customers can overcome traditional barriers to economic activity. Fielder said that in some countries like Kenya, Ghana and Uganda, they see as much as, "50% of payout volume going to wallets."

However, mobile wallets can also enable users to send traditional cash back home.

Cash

Cash also plays a key role to Ria's solution, as customers can send funds through a variety of means. For example, once the funds are sent via a mobile wallet, the receiver can withdraw cash from an ATM or a Ria physical location.

"With a mobile wallet, users have access to a broad range of financial services including receiving money transfers, paying bills, obtaining loans or withdrawing cash," Fielder said. "Our customers can transact from bank account to bank account or to wallet, from cash in our physical network to payout in cash, from cash to a bank account or mobile wallet payout, or a combination of both. The omnichannel experience means customers can take advantage of both our physical network and our digital capabilities."

This is particularly useful as in some countries, most of remittances rely exclusively on cash, and in turn ATMs.

ATM

In some countries, including Mexico, there is a severe lack of digital payments so migrants have to utilize tools such as prepaid debit cards, according to Bernardo Bátiz-Lazo, professor of fintech history and global trade at the Newcastle Business School, Northumbria University (U.K.) and research professor at the Faculty of Economics and Business, Universidad Anáhuac and Ignacio González-Correa, independent consultant and graduate student at the Department of Economics, University of California, Davis.

"About 90% of family remittances in the Mexico-U.S. corridor start and end in cash. ATMs play a critical role by enabling senders convenient access to cash at the point where they will initiate the transfer," Bátiz-Lazo and González-Correa said in a recent ATM Marketplace story. "As of December 2019, Mexico reported approximately 58,000 ATMs operating around the country. Multipurpose banks concentrated nearly 98% of the ATMs, with approximately 56.620 devices."

How to offer money transfers?

Some businesses might want to offer money transfer services such as remittances to their customers, but not be sure of a way to do it. For El Rancho Money, a Ria authorized agent, there are a few key traits to look for when selecting a company to help get money transfer services set up.

"Every business is different, and they all have their unique set of needs to cover," Guillermo Zuniga, CEO, of El Rancho Money, said in an email. "When choosing to integrate a new provider, for money transfers, we recommend considering and evaluating the following: Research the company's public reputation; Review the set of products, services and network offered by the company; Is the financial proposal fair; Evaluate the operational system; Consider the service level for your business and your customers; and Is the company operating under all the regulations required by this industry?"

Given its project growth, the remittance market will continue to provide massive investment into developing countries and multiple payments methods, including cash and mobile wallets, will play a role in the market.