Payments

What We Learned About Remittance Industry in 2015, in Charts

MEDICIFounder and Chief Strategy & Innovation Officer

The article provides you with a flashback of the major touchpoints for the remittance segment in 2015. The initial wave of innovation was leveraging digital technology to reduce the cost of sending money abroad. The usage of online channels and mobile has led to multiple startups, payment channels, instruments and more choice for consumers. The push by the World Bank for lower costs in sending remittances has made these digital solutions more attractive. Apart from costs, the new-age solutions also provided enhanced customer experience, higher convenience and multiple brand options to choose from.

Remittance 1

On the other hand, incumbents haven’t been holding back. Western Union and MoneyGram have been quick in responding to these challenges and have enhanced their offerings by partnerships, acquisitions, or by in-house innovation. We have talked about this trend in our analysis “Western Union and MoneyGram Say ‘Elephants Can Dance’.” Both Western Union and MoneyGram have aggressively adopted a multichannel approach and have partnered with banks, network operators and mobile wallet service providers. Around 6% of Western Union’s total revenue is contributed by its digital business which includes westernunion.com and mobile money transfers. Around 15% of MoneyGram’s revenue is contributed by self-service channels like online, mobile, account deposit, ATM and kiosks.

Remittance 2

The cost of remittance has been on the decline since 2008-09 when the World Bank, the G8, and later, the G20 have mandated to reduce the cost from more than 10% then, to around 5% now. This initiative has made significant progress and the average cost of sending remittance stands at 7.68% as of June 2015. The World Bank estimates that this reduction in cost has saved migrants and their families more than $60 billion. In June, the World Bank came up with a new initiative called the Smart Remitter Target (SmarRT), which will monitor remittance transactions at a more granular level with the aim to ensure that there are at least three remittance service providers  in each country corridor who charge 3% or less to send money.

Remittance 3

Another major trend that we have seen is that globally, banks have started to exit or cut their exposure to remittance business. Specific banks include JPMorgan Chase, Bank of America, Banamex USA in the US; Westpac in Australia, Barclays from the UK, BBVA from Spain. The common reason for these are regulatory pressures, lack of control and visibility over the remittance corridors and increasing costs.

The year 2015 has also seen a number of startups that have sprung to provide money transfer services by utilizing blockchain. The concept is being tested by multiple large banks, not only to provide remittance services but also to reduce the overall transaction costs associated with inter-bank transfers. The concept has gained such significant interest that Bank of America had filed an application to patent its cryptocurrency-based remittance service that it could plan to launch later.

Here are some of the major startups that have raised funding in the remittance segment in 2015:

TransferWise, a P2P cross-border money transfer service provider, raised $58 million.

WorldRemit, an online and mobile remittance service provider, raised $100 million.

Remitly, an online remittance service provider, raised $12.5 million.

Align Commerce, a blockchain remittance company, raised $12.5 million.

Other major news:

MasterCard to Use HomeSend for Remittance Services In India

PayPal To Buy Xoom, The Remittance Player, M&A Team Picks Another Gem

UK Banks to Enable International Remittances in Mobile App Using TransferWise’s API

Western Union partnerships: WeChat, Yandex.Money in Russia, with Hyperwallet to make mass payments product.

LTP Research Reports in Remittance:

International Remittance: LTP9 Canvas Report

South and Southeast Asia Remittance Market Outlook: A Research Report

Middle East Remittance Market Outlook: A Research Report

Report on Vietnam Remittance Landscape

Opportunities in Indonesian Remittance Market

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

“Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.\ \ Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.\ \ Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.”