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International remittances the next big thing in mobile payments

The World Bank estimates that in 2011 more than USD 483 billion was sent internationally through official remittance channels with the bulk of that – $351 billion – going to developing countries. It projects that the total will rise to $593 billion by 2014, with $441 billion going to developing countries. The amount that flows through informal channels is obviously difficult to quantify, but the IMF estimates it may be as much as 50% greater than the official amount. So obviously a great deal of money is moving across borders in relatively small amounts and at a relatively high cost: the average remittance is probably less than $1,000, and the World Bank estimates that the average person pays almost $12 in fees to send $200 from the US to Mexico, the largest single remittance corridor in the world. 1 Since the mobile phone is increasingly the dominant means by which workers overseas keep in touch with their families and friends back home, and since domestic mobile payments are becoming more common around the world, it is natural to think that the same channel could be used to send international remittances, and possibly reduce costs and increase convenience at both the sending and receiving ends. Unfortunately, the role of mobile payments in international remittances has been modest so far. A total of 2,121 international services are included in the World Bank’s September 2011 Remittance Prices Worldwide (RPW)2 database: only 10 of these are mobile services. A study conducted in early 2012 by CGAP (Consultative Group to Assist the Poor) found only 17 live mobile cash-out international remittance services, primarily in Asia3 . This white paper looks at some of the drivers and inhibitors of mobile payments in the international remittance sector and assess the near to medium term future for mobile remittances.

Cleo Turner
Cleo is DFI's CDFP coach and helps our students with the apply section of the Certified Digital Finance Practitioner (CDFP) program. As part of her role Cleo shares useful resources and insights from a wide variety of sources and authors with our community.

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