Compounding the severity of the situation, sending money by traditional channels remains costly for many low-income migrant workers. Under ordinary circumstances, this is a challenge, and even more so during a steep economic downturn. The World Bank estimates that the global average cost of sending $200 was 6.8% in the July-September period, roughly the same as in the quarter ended March 2019. That figure is well above the Sustainable Development Goal target of 3% by 2030.
Unsurprisingly, banks remain the priciest channel for sending remittances, with the fee for a bank transfer costing 10.9% of the overall transaction. Post offices are nearly as expensive at 8.6%. In contrast, money transfer operators and mobile operators cost just 5.8% and 2.8%, showing the potential for digital finance to facilitate remittances at a lower price point. This augurs well for remittance flows in the long term.
For instance, India's United Payments Interface (UPI) is playing an increasingly important role in remittances to India from overseas. In October 2019, Western Union and India's YES Bank announced that they would collaborate to offer cross-border remittances via UPI, marking the first time a bank in India integrated UPI to remit money into the country on a commercial basis. The cross-border services have allowed millions of Indians overseas to send money home or elsewhere in the world digitally and in real time.
“We are expanding from our roots of creating one of the largest physical money movement networks covering the first and last mile in India to pioneering integration with India’s advanced real-time payments systems," Western Union CEO Hikmet Ersek said in a press release.
Remittances are also a key business focus for Singapore-based fintech infrastructure platform Nium. In October, Nium announced that it would partner with South Korea's E9pay to expand the latter's remittance services to the United States, Indonesia, India and parts of Europe. Also in October, Nium announced a tie-up with San Francisco-based Unifimoney that will enable the neobank to remit funds globally and in real time.