The number of immigrants has increased significantly in the last two decades. In 2020, 281 million people lived outside their country of origin, which is considerably higher than the number 173 million recorded in 2020. And I have no doubt this number will increase in the future. Many immigrants move to new countries in search of better working conditions, more pay and better living standards. Immigrants sign a social contract with their families to send back the money in their pursuit of a better life in another country. Remittances support the families of migrants or enable them to invest in local opportunities.
Remittances sent back home serve as lifelines for many families. Despite playing such a critical role for so many families, remittances historically have been expensive. The primary reason for this is the security involved and incapability in managing and moving funds across the border efficiently. But today, we are witnessing how digital solutions can help transfer money abroad. By assisting individuals by providing affordable rates, digital remittance can potentially reduce global poverty on a macro level.
A few years back, the notion that you can send money across the globe in minutes by just using your phone seemed impossible. Today with advancements in technology, it is possible. In particular, mobile technology has since evolved to allow for faster, more convenient, cost-effective, and more secure remittances.
Going Digital Reduce Cost
Earlier banks and other service providers relied on their humongous agent networks to send money globally. But with so many parties involved in the transfer, it added to the transfer time and, more importantly, the cost. But digital remittance cuts down on the involvements of multiple parties in the transfer process, which helps in cutting down the cost. Moreover, digital remittances are associated with existing bank accounts in each country, translating to a secure money transfer process.
Cost-cutting on remittance fees will also assist the economies of many countries. Today the average cost for remittance is nearly 7%. In contrast, the average cost of digital remittance is approximately 3.5%. Meaning adopting digital channels of remittance can help reduce cost by almost one-half. If we review the numbers of 2019, the World Bank estimated remittance flow to low-and middle-income countries (LMICs) to reach $551 billion. With competitive rates provided by the digital channels, expats could have saved a considerable chunk in the remittance process.
Today millions live below the international poverty line of $1.90 per day. With cost savings, expats can provide additional remittances, lifting many families living out of poverty.
Only the Beginning
Digital remittances also assist the UN with a Sustainable Development Goal to lower remittance costs to less than 3% by 2030. The digital channels had almost achieved this goal in 2019.
But these opportunities presented by the digital medium are limited to those with access to the necessary technology. Therefore it is critical for the government and both public and private sector to work together and make the internet accessible to all. Also, it is essential to raise awareness and understanding of all the digital tools with innovation in financial technology. With the recent pandemic and a consumer shift in non-cash transfers, digital remittance can play a more prominent role in providing economic opportunities who need the most.
For a secure and hassle-free transfer experience, choose ATL Money Transfer. We provide great exchange rates and low fees so you can save more while sending more. We have also simplified the transfer process. Now, you can send money home with just three simple steps.