International money transfers are becoming a necessity now that the world as a whole has gone global. Remittances, in particular, take a large part of this industry and it’s the workers who send money to their families at home are the ones most disadvantaged by the current money transfer system. Millions of people require a way to transfer their funds across borders that won’t cost a small fortune in fees. And luckily, today such ways are beginning to appear.
Why Expensive Remittances Are a Global Economic Problem
Remittances are important not only to the families of migrant workers but to economies of their countries and therefore the global economy as well. To understand the impact these money transfers have, you should know that for some countries, they make up over a quarter of Gross Domestic Product (GDP). For example, 31% of Nepal’s and 29% of Haiti’s GDP comes from remittances.
Even in the countries where a large part of the economy isn’t dependent on these payments, they play an important role. This is because this type of money influx from abroad is the most stable, meaning it matters greatly for the economic stability of the state as a whole.
The sheer amount of remittances is also an important factor. India is the world’s leader in this as it got over $80 billion in remittances last year. This country can also serve as a prime example of how important it is to cut the cost of such transfers because with India’s huge remittance pool, the country still loses several billion because of the expensive transfers.
And it’s the same for every developing economy as the companies and banks that run this industry literally slow down the development of these countries for no other reason than personal gain. This impact is felt on the state level but it’s much more devastating for individuals and their poor families who have no choice but to give away their money in exorbitant fees.
The Global Money Transfer Industry Is Turning with the Help of Tech
The good news is that the situation is much improved today and it keeps getting better. Obviously, considering the impact of remittances and other cross-border money transfers on the economy, this industry couldn’t remain the monopoly of the few companies that charged those huge fees.
The demand for the services has skyrocketed and in response to it you now have multiple cheaper ways of remitting money to India as well as other states. Although, admittedly, India is currently at the top in this area as well. It’s definitely because the remittance industry here is so large, thus it offers the best business opportunities for those offering alternative transfers.
Only a little over a decade ago, the majority of international money transfers went through banks and companies like Money Gram and Western Union. These providers remain strong even today, especially with bigger business clients.
However, this whole industry was revolutionized with the creation of modern fintech startups that started offering quick, secure, and, above all, cheap international money transfers. The top companies among these service providers vary quite a bit, but all of them rely on external funding to operate and they collect millions of said funding with ease. This is a clear indicator that even the biggest corporations of the world understand that a change in the international money transfer industry is necessary.
And the industry reacts to this change in demand. Today, with dozens of new providers springing up all over the place, the industry can no longer function by charging high fees. Such policy is, quite frankly, unsustainable. Therefore, the services in this business now seem to be racing down as they lower their fees or forego them at all, seeking their private income from the volume of transfers.
That’s why the majority of these businesses put a lot of focus on India, which currently offers the highest remittance pool, and that’s not even counting all the money that comes into the country from foreign investors. These individuals and businesses are also recognizing the benefits of cheap, fast, and secure transfers. Therefore, more often, they are opting for these alternative money transfer methods instead of traditional banks.
This trend is sure to continue, which means that the remaining “traditional” money transfer businesses will have to evolve. Perhaps, having more opportunities and well-established brands, they will be able to add some new revolutionary innovations into the rapidly-changing international money transfers scene.