Evolution of Remittance Services Revolutionizing Emerging Economies

Highlights:

• Introduction
• Growing applicability of remittance services
• Profitable acquisitions made by top players in the industry

 With the globalization of trade, a secure and reliable payment mechanism became essential for monetary transactions. Nowadays, people are traveling cross borders in search of high-paying jobs, career advancement opportunities, and permanent citizenship. The significant increase in international transfers has led to a surge in sending money to family and friends back home through remittances.

Remittances are the exchange of money using a transfer medium.  These include transfers like business payments and people sending funds to their family in their home country. Remittance payments are settled immediately as soon as they are transferred from the other party. These payments are chargeable, and the transfer fees vary from country to country.

Unlike other financial inflows such as foreign direct investment (FDI) or international aid, remittances are direct transfers, usually aimed at supporting families with basic needs like food, housing, education, and healthcare. This direct impact helps reduce poverty levels and improves the quality of life for recipients.

According to the World Bank, remittances to low- and middle-income countries reached a record high of $589 billion in 2021. For many nations, these funds surpass other forms of international financial inflows. For instance, in countries like Nepal and Tajikistan, remittances account for over 25% of their GDP, highlighting their dependency on these transfers.

Emerging use cases of remittance services in developing countries

One of the most significant advancements in this landscape is the rise of digital and mobile wallets. These platforms have revolutionized the way remittances are sent and received, particularly in developing countries where traditional banking infrastructure is not available. Services such as M-Pesa in Kenya and GCash in the Philippines enable recipients to receive funds directly into their mobile wallets. They are also used for various transactions such as paying bills, purchasing goods, and accessing other financial services.

Moreover, the rise of innovative financial products that link remittances to insurance services are gaining traction these days. Such products provide a dual benefit to recipients which include access to regular funds from remittances and coverage against unforeseen events such as illness, accidents, or natural disasters.

In addition, remittance flows are being optimized to improve access to microfinance and credit services. Many financial institutions are increasingly recognizing remittance recipients as viable clients for microloans and other credit products. They provide recipients with access to the required capital for small business ventures and personal needs.

Also, in some regions, remittances are being used to finance green energy solutions such as solar panels and clean cooking stoves. By facilitating the purchase and installation of renewable energy products, remittances are helping to improve energy access and reduce environmental impact. These initiatives are often supported by partnerships between remittance companies, NGOs, and green energy providers. These innovative applications of remittance services are expected to fuel the growth of the remittance industry in the coming years.  

DWC and Remitly revolutionize remittance services with enhanced convenience

In February 2024, Digital Wallet Corporation (DWC), a Fintech & AI company that aims to improve the quality of life for individuals and their families who travel internationally announced its acquisition of Seven Global Remit, a renowned provider of financial services. This agreement allowed DWC and Seven Bank to collaborate in redefining and improving the landscape of international money transfer services and financial inclusion for foreign residents in Japan. As DWC owns and operates Smiles Mobile Remittance (Smiles), known as Japan’s mobile remittance application. With the alliance between DWC and Seven Bank, all Smiles customers gain access to Seven Bank’s extensive ATM network after the service transition, enhancing convenience.  This acquisition establishes Smiles Mobile Remittance as the premier choice for foreign residents in Japan, providing access to the country’s ATM network.

Similarly, in August 2023, Remitly, an American online remittance service acquired Rewire, an Israeli-based remittance fintech company. This acquisition helped Remitly to develop deeper relationships with customers, providing additional flexibility and convenience and adding further capacity and expertise through the onboarding of its own product development and engineering teams. According to Matt Oppenheimer, the CEO of Remitly, the company has focused on delivering trusted digital financial services to serve immigrant communities around the world by offering trusted financial services that are inclusive and accessible to all.  

Winding up, remittances are more than just financial transactions. They are lifelines for millions of families and critical components of several developing economies. In this growing interconnected world, the importance of such transactions is set to grow. By incorporating the latest technologies and embracing innovative financial products, remittance services are expected to create new opportunities for financial inclusion, economic development, and social impact.  

To identify and capitalize on new market opportunities in the remittance industry, feel free to reach out to our industry specialists here! They will also help develop and implement strategies to improve your business performance.

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