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How is Fintech revolutionizing Remittances?

Apr 7, 2021

The word “Remittance” means money sent to an individual in another place. The Latin origin of the word means “To let go or to send.” As the human civilization evolved, so did remittances. It was earlier a bill payment done via mail or a cheque sent for an appliance purchase. But, today, remittances are a much more complex phenomenon. It is hard-earned money of the immigrants sent back home to their families.

Until the last decade, immigrants were heavily reliant on banks or FOREX brokers to relay their earnings back home. It came associated with a hefty fee and a longer waiting time of a week or more. It involved multiple players, the differences in conversion fees, processing fees, and so on.

But, then again, over the years, Fintech’s intervention has changed the remittance landscape for the better. The primary advantage is the time taken to send the funds across the border. What takes weeks to complete, Fintech does it in seconds. They have turned the tables by providing competitive exchange rates, which were almost close to existing market rates.

They have enabled multiple ways of currency transfers where the remitter can send money via:

  • Enabling customers to see multiple exchanges fees at one place and then make money transfer within the platform — TransferWise (now Wise)
  • Doing remittances in bulk and passing on the savings to the Customers.
  • Internet-enabled smartphones

The advent of account-linked mobile wallets like Google Pay, Apple Pay, Venmo has brought down the transactional fees to a bare minimum or no fees at all. Meaning all the international transfers happen through an app. They have provided the option for the customer to choose their preferred method of payment, right from the comfort of their homes.

In fact, India holds first place in the remittance industry. It has averaged US$76 billion in 2020, despite the general decline in remittance across the globe as per World Bank. The main reason why India is the leading country in the remittance index is because of its large diaspora of expatriate population. It is closely followed by China and Mexico in the second and third places, respectively.

Additionally, Fintech has unlocked vast amounts of user data, helping to better understand user behavior. The data provides utmost detail right down to the kind of phone used, frequency of transfers, locations, etc.

What are Fintechs doing?

From extending reach of their in-app payment and transfer solutions, Fintechs are evolving how the age-old Exchanges have been working. While tying up with Banks and Exchanges in regions like GCC and executing remittances on their own in regions like the USA & Europe.

  • Extending Banking to the Unbanked:

The Fintech catering to low-income-income migrant workers, primarily in the GCC, provides them with solutions like debit cards, bill, payment, and mobile top-up facilities in-app. These fintech players are extending banking to the unbanked, giving them proper accounts, shopping online, and building their credit histories. Such customers’ data will further help them roll out services like Insurance and Credit (loans). — NOW Money

  • Blockchain-Powered Digi-wallet:

Fintech players are taking remittance to another level where cash is converted as digital currency using blockchain-powered Digi-wallet. The money can be transferred to anyone having the wallet app installed (more like Intra-app transfer) using this wallet. They further create an ecosystem where the App’s user can do transactions anywhere, without even considering converting the digital currency to actual currency. — MenaPay

With digital payments shrinking the world, transferring money across borders is now the new normal. New-age Fintech is constantly innovating the best practices to offer enhanced transparency while maintaining high-level security.

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