May 23, 2018
Globally, remittances reached $613 billion in 2017. After two consecutive years of decline, remittance flows rebounded in all regions in 2017: in Europe & Central Asia by 20.9%, in sub-Saharan Africa by 11.4%, in the Middle East & North Africa by 9.3%, in Latin America & the Caribbean by 8.7%, in East Asia & the Pacific by 5.8%, and in South Asia by 5.8%. The rebound of remittance flows is driven by economic growth in the EU, the Russian Federation, and the US, alongside a firming up of oil prices and (the valuation effects of) a strengthening of the euro and the ruble against the US dollar.
After two consecutive years of decline, remittance flows to low- and middle-income countries (LMICs) increased by an estimated 8.5% in 2017 to reach $466 billion, a new record. Remittances are now more than three times the size of official development assistance.
Excluding China, remittance flows are also significantly larger than foreign direct investment (FDI) in LMICs. Remittances are relatively more stable than cyclical private debt and equity flows.
Remittances were larger than expected in Europe & Central Asia, sub-Saharan Africa, and the Middle East & North Africa, driven by a cyclical economic upturn observed in Europe, the Russian Federation, and the United States, and related to exchange rate movements.
According to the World Bank’s Remittance Prices Worldwide Database, the cost of sending money to LMICs remained flat at 7.1% in Q1 2018. This is well above the Sustainable Development Goal target of 3% sought to be attained by 2030.
The cost in South Asia was the lowest at 5.2%, while sub-Saharan Africa continued to have the highest average cost at 9.4%.
Remittance costs across many African corridors and small islands in the Pacific remain above 10%, because of the low volumes of formal flows, inadequate penetration of new technologies, and lack of a competitive market environment.
Consistent with this global growth pattern, remittances to LMICs are expected to grow at about 4.1% in 2018 to $485 billion. However, there are downside risks to this outlook. Policy uncertainty and geopolitical risk, increased restrictions on trade, and a sharper-than-expected slowdown in potential growth may derail global growth. Moreover, no solutions are yet in sight for the difficulties posed by the de-risking practices of correspondent banks. Also, remittance flows are vulnerable to downside risks from spreading anti-migration sentiments and restrictive migration policies in most of the remittance-source countries in North America, Europe, Russia, and the GCC.
Cryptocurrencies & blockchain
Even as cross-border money transfers are dominated by cash transactions, the use of the Internet and mobile phone technology has grown in recent years. More recently, remittance market players have shown growing interest in exploring the use of cryptocurrency and blockchain technologies for value transfers and customer ID verification. Although global banks have had limited direct involvement in cryptocurrencies, the industry has been very active in pursuing initiatives around the blockchain technology. The opportunity set around direct cryptocurrency trading seems rather limited in the face of AML and KYC concerns.
Meanwhile, the blockchain is not yet industrial grade in the view of many in the banking sector. In the near-to-medium term, the technology may be applied to reduce infrastructure costs attributable to securities trading, cross-border payments, and regulatory compliance. Smart contracts can help create a streamlined payment system by eliminating physical documentation and automating contract execution. This has the potential to significantly reduce remittance costs.
Globally, remittances reached $613 billion. Remittance flows rebounded in all regions in 2017: in Europe & Central Asia by 20.9%, in sub-Saharan Africa by 11.4%, in the Middle East & North Africa by 9.3%, in Latin America & the Caribbean by 8.7%, in East Asia & the Pacific by 5.8%, and in South Asia by 5.8%. The rebound of remittance flows is driven by economic growth in the European Union (EU), the Russian Federation, and the United States, alongside a firming up of oil prices and (the valuation effects of) a strengthening of the euro and the ruble against the US dollar.
In 2017, Scamwatch, the Australian Cybercrime Online Reporting Network (ACORN) and other federal and state-based government agencies received over 200,000 reports about scams. The combined losses reported to Scamwatch and these other agencies exceeded $340 million.
The top three most reported scam categories of 2017 were phishing, identity theft, and false billing scams. Combined reports to ACORN and the ACCC showed that the resulting monetary losses from the theft of personal information exceeded $45 million.
Investment scams had the highest losses reported in 2017 with reports to Scamwatch and ACORN exceeding $64.6 million.
Losses reported to Scamwatch increased in 2017 to $90.9 million which is an 8.8% increase over 2016 losses which totaled $83.6 million. Losses to investment scams reported to Scamwatch increased by 33% in 2017 to $31.3 million.
The percentage of Scamwatch reports which included a financial loss increased from 7.5% in 2016 to 8.7% in 2017 (this means more reports included a loss). The average amount reported to Scamwatch from those who lost money was $6471. This is a 10% decrease from the average loss in 2016 which was $7226. The lower average loss in the Scamwatch data can be attributed to a greater number of reports with lower loss amounts and these were mostly found in online shopping scams.
Cryptocurrencies in scams
The use of cryptocurrencies as a payment method in scams and scams capitalizing on the popularity of investments in cryptocurrencies peaked in the last quarter of 2017. Approximately $2.1 million in losses where cryptocurrencies were a factor in the scam were reported to Scamwatch in 2017.
As mobile phones have become part of our everyday lives, mobile shopping has evolved from a simple convenience to a recreational experience. In fact, two-thirds (67%) of Australian smartphone users browse shopping sites for fun or to pass the time without any plans to buy.
Although they may have no intent to purchase, 77% of those who ‘window shop’ on their mobiles for fun have made an impulse purchase in the process. One-in-five (20%) Australians and 31% of those aged 18-34 say they’re more likely to make an impulse buy via mobile than via desktop.
The frequency of browsing retail sites for entertainment is also high, with 46% of respondents stating they ‘window shop’ on their mobiles for fun at least once a week, 30% more than once a week and almost a tenth (9%) browse for fun daily.
Younger Australians (18-34-year-olds) are the greatest consumers of online retailtainment with 62% browsing for fun at least once a week on their mobiles, and 15% of Gen Zs doing so daily.
While only 51% of Australian businesses that sell online have a mobile-optimized retail site, the innovators in that cohort are developing new and engaging ways to win and retain customers – such as augmented reality and voice assistants
Try before you buy: AR
AR is a high priority for Australian consumers with 51% of mobile shoppers saying they’d like to see more online retailers offer AR on their websites. However, to date, only 5% of mobile shoppers have used an augmented reality online retail experience.
IBM is partnering with blockchain company Veridium Labs to transform carbon credits into digital coins that can be traded on a decentralized exchange. The tokens will be issued and managed on the Stellar network.
The purpose of the project is to make it easier and cheaper for companies and individuals to account for their footprint and neutralize the impact they have on the environment. About $4.8 billion was spent in the past 10 years on carbon credits in the private market.
The token will be backed by credits that Veridium’s sister company InfiniteEARTH receives for its development and management of the Rimba Raya rain-forest in Borneo; it can be bought by companies that want to offset their carbon emissions. The token also facilitates the process through which companies can quantify their environmental impact.