Mobile money on reducing the cost of remittances
Mobile money is considered to be among the most promising innovation. Although the consumer base of such services is already more than 400 million people, potential for further growth is even stronger. Recently we came across to a very interesting report from GSMA, which deals with the international transfers through mobile money solutions and the outlook of this specific sector. The report (“Driving a price revolution: mobile money in international remittances”) notes that while today most mobile money services are used for domestic transactions, international transfers represent the fastest growing mobile money product line.
Remittances, as we all know, is the most common method which is used from migrants in order to send money to those who left behind, family, friends local communities etc. According to the report, until previous August, there were 53 mobile money services (covering 170 million accounts) that offered customers the ability to send money across 45 country corridors, a number which is growing quickly. Interestingly, most of these corridors are between African markets. For someone who is in touch with African market this is no surprise as alternative formal remittance channels have a limited presence and can be particularly expensive.
In terms of money, in 2015 5.2 billion dollars were sent across these 45 corridors. This represents just 1.2% of the total amount of money that was remitted to developing countries this year but what is impressive is the year-on-year increase. 52%! Additionally, international transfers were the fastest growing product of mobile money solutions for the second year in a row.
The most significant conclusions of the report which at the same time are the greatest benefits of international remittances through mobile money are:
- Mobile money is, on average, more than 50 percent cheaper than using global money transfer operators
- Mobile money is particularly competitive for low value transactions
- Mobile money is increasing competition. As a result, prices of remittance services are driven down
- Mobile money-enabled international remittances are contributing to broader financial inclusion and financial integrity objectives
- Mobile money is an important tool to achieve the 2030 targets set by SDG 10.c
One significant barrier for further development of mobile money remittances is (once more) regulation. Today, only in 16 of 93 countries where mobile money is available users can send international remittances through their phone, as regulation prevents mobile money providers from sending, and, in some cases, also receiving international money transfers. As the reports notices, reforms will increase competition and lead to lower prices. Thankfully, there are some countries that have already acknowledged this need.
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