Collaboration and partnership will improve money movement for the unbanked
For 36 countries around the world, remittances represent more than 10% of their respective GDP; for 14 countries, it is more than 20%, according to The World Bank’s data. For El Salvador, my country-of-origin, remittances represent roughly 25% of the GDP – five times more than all agricultural production.
Like me, more than three million individuals have migrated from El Salvador since the 1980s when the country was immersed in a civil war. Globally, the reasons for such migration vary: working opportunities, education, calamities, national disasters, security reasons and many others.
Today, there are more than 200 million individuals who send money back home to support friends and families. On the other side, 800 million individuals receive more than $700 billion in financial aid. If these 200 million workers were a country, they would be one of the top economies in the world; if the 800 million recipients were a country they would be two times the population of the United States.
Sending and receiving money internationally is not an easy task. There can be significant challenges – distribution, technology, user experience, disbursement locations and regulations – that have created a very fragmented payment network and many inefficiencies. I have experienced first-hand the complexities of sending money back home to my relatives in El Salvador.
Today, every domestic payment transaction at a physical point-of-sale or in e-commerce involves multiple intermediaries and technology platforms, yet the transaction happens in a blink of an eye because all parties collaborate and know the role that each plays. The result is a seamless user experience for the consumer that we take for granted.
The same is not necessarily true for cross-border money movement. There is not a uniform user experience, and the existing technology has some integration challenges. Collaboration with the entire ecosystem will be key in the next couple of years to create harmonised networks that can transfer data and money flows cross-border seamlessly.
Compliance, regulation, and licensing are critical considerations for better collaboration. There’s an opportunity for the public sector and policymakers to create consistent and transparentrequirements. Such alignment can help reduce compliance costs for participants and can help protect consumers across markets.
Digital platforms can be the glue to help facilitate collaboration, improve user experience, reduce friction and minimise distribution costs.
For unbanked individuals in emerging markets, mobile wallets are gaining traction as an empowering first entry point into the financial system. Recently, Visa announced its latest partnership with a payments infrastructure platform, Thunes, with a network of mobile wallets across 44 countries and territories. The partnership expands the reach of Visa Direct and helps individuals and small businesses send money domestically or across borders to 78 already-integrated digital-wallet providers representing over 1.5 billion digital wallets around the world.
With this Thunes partnership, Visa’s worldwide reach will grow to nearly seven billion endpoints across cards, accounts and digital wallets.
According to a recent analysis by Juniper Research, wallet users are projected to exceed 5.2 billion globally by 2026 – up from 3.4 billion today – making digital wallets the fastest-growing financial instrument for individuals and small businesses.
There is a huge opportunity in the next few years to build on the progress made in digitising remittances, which has proven to be a lifeline for the families of migrant workers receiving money. For starters, digital payment services need to support better access for local economies to use the benefits of digital transformation, allowing economic mobility and improved household income and prosperity upward.
Companies and consumers require financial technology to be available in a way that works for them in any country, in any currency, and across borders. With our new send-to-wallet capabilities, we’re expanding borderless digital transformation and creating new endpoints for different channels of payment that will allow more countries, especially under-banked regions, to access financial services.
By Ruben Salazar Genovez, global head of Visa Direct