The New Year begins and already there’s a spate of pieces on cross-border—in this case remittances—which is the person-to-person version of the various use cases.
We discussed the uses in recent member research, although that piece was primarily dedicated to B2B cases. In this referenced article posted at Crowdfund Insider we have a rehash of an update around remittances that was recently released by the payments firm Wise (formerly Transferwise), which covers an issue most readers of these pages know to be the relatively high cost of international funds transfers between individuals. The author relates some of the points made in the mentioned update, which includes a UN Sustainable Development Goal going back to 2015 for the purpose of lowering remittance costs. The article quotes a G20 total remittance transfer total of $212 billion last year, which purportedly cost almost $12 billion in fees (roughly 5.5%), which is similar to other numbers we have seen from the World Bank.
In our member research we also pointed out the 2014 plan to facilitate remittance flows from the G20[i] as one of the foundational initiatives to improve remittance costs. Part of the responsibility of participating countries is to issue periodic reports on sovereign progress. As an example of the market size, in the 2021 report by the United States (U.S.)[ii], the 2020 remittance outflows in the U.S. alone were stated to be $68 billion at an average cost of 4.88%, This G20 effort is likely cojoined with the UN version in some fashion.
The author summarizes the report by indicting that the key reason remittance prices are still quite high is the lack of adequate transparency for the funds transfer process, for which sending clients may be told are performed cost free with no commission, or sometimes with relatively modest flat fees. However, the hidden cost will typically be FX rates, which can negatively impact the transaction costs. The remainder of the piece again points out the report from Wise, for which a link is provided for interested parties to download. Following is a bit of an advert for Wise, which indicated large personnel growth in 2022 of 49% over prior year, mostly U.S-based in primarily Austin and Tampa.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.