FinTech: Cross-Border Remittances Alleviate Poverty; But They Must Be Easier, Cheaper
Ruben Salazar Genovez, Global Head of Visa Direct, writes in a blog that Visa Direct is bringing scale, security and efficiency to digital cross-border payments.
Worldwide remittances to low and middle income countries (LMICs) of a cumulative $4.7 trillion helped lower the global rate of extreme poverty (defined as people living on less than $1.90 per day) from nearly 36% to 10% during the years 1990-2015. Ruben Salazar Genovez, Global Head of Visa Direct, writes in a blog – The human impact of cross-border remittances – that global, cross-border remittances must be simplified and made cheaper to drive financial inclusion and build wealth where there is poverty.
How cross-border remittances make a difference
Genovez cites more statistical data on how remittances make a huge difference to millions of people’s economic health around the globe:
- In 2019, the total value of remittances sent by some 200 million migrant workers to their home countries was a record $706 billion — $554 billion of which went to LMICs
- In 2021, remittances to LMICs are projected to reach $589 billion
- Despite the pandemic, remittance flows declined less than 2% for 2020, demonstrating the resilience of migrant workers
- A Visa survey found that almost a quarter (23%) of surveyed U.S. adults have sent money from the U.S. to another country already, and 15% of total U.S. adults surveyed plan to send money to another country within the next year
- Globally, it is estimated that 800 million people receive remittances to pay for things like food, utilities, and education — and the method for doing so has not always made it easy.
According to Genovez, users seek speed, lower costs and security for their remittances, yet “every user experience left me with some degree of stress and frustration,” citing the challenges he faced when he changed job locations in his career but needed to send money home.
Acknowledging that new fintech players had accelerated the digital transformation of remittances, Genovez feels “there is still room for improvement – for user experience to improve and costs to fall.”
Location matters no more, connectivity does
In a very telling observation Genovez writes: “During the industrial revolution the mass migration was to urban areas—areas with large factories that offered steady work, affordable housing, electricity, better living conditions and the opportunity to prosper.”
“In the digital revolution, people are looking for connectivity and technology. Where you are doesn’t matter as much, so long as you’re connected.”
But the process of sending remittances is still clunky on the fronts of technology, economic models, providers, and user experiences.
The ecosystem can help nurture these industrious people working so hard, far from home, by streamlining the process of digital remittances. This would also drive financial inclusion in their home countries, suggests Genovez.
Earlier this month, Visa (NYSE: V) Canada announced a new offering with CIBC and Simplii Financial to help their consumer and commercial customers more easily move money.
Using the Global Money Transfer Service offered by CIBC and Simplii Financial, their consumer and business clients can now send money to a combined total of over 5 billion cards and bank accounts with real-time capabilities, enabled by Visa Direct.
Related Story: Bakkt’s Virtual Visa Debit Card To Work With Google Pay
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