Digital Wallets and Networks Shake Up the $630 Billion Global Remittance Market

The global remittance market — where hundreds of billions of dollars flow across borders annually — is being reshaped by digital disruption.

Late last year, the World Bank estimated that remittances last year grew by 5% in 2022, to $626 billion. Generally speaking, remittances are a key source of funds for workers and other individuals sending funds home to friends and family.

Given the fact that, as the World Bank also estimates, 1.4 billion adults remain unbanked, the movement of money needs to transcend what might be thought of as traditional conduits — namely, bank accounts.

In recent months, we’ve seen some shifts in the industry, where technology has propelled cross-border solutions more fully into the digital age, and in many cases away from the brick-and-mortar settings where agents receive cash on one end of the transaction, redeemed in cash in another country.

Some of the players that have been around for decades have, of course, been shifting to digital channels — a shift hastened by the pandemic, when agent offers were shuttered amid country-wide lockdowns. But they’re facing competition from digital-only upstarts.

The Major Players — and Some Disruptors, Too

By way of example, in its latest earnings results, Western Union is seeing growth in the number of digital transactions. For the March quarter, the company logged 7% growth in the number of digital transactions, with 14% growth in the firm’s branded digital customer base.

MoneyGram is going private, in a deal that is expected to close in the current quarter. The company’s filings show that for the first quarter of 2023, the company’s digital revenues were up 30% — and digital now accounts for 50% of money transfer transactions. Going private, we note, is one way that MoneyGram can leverage its resources and cash more fully into digital efforts — and grappling with industry-wide change — without having to endure the vagaries of investor sentiment with each and every quarterly report.

The ways in which remittances may be changing are heralded by the continued emergence of digital wallets and P2P offerings.

In but one example, Visa last month launched a new service, Visa+, that allows P2P payments to be sent and received across different platforms — and thus across geographies — without needing to have a Visa card. The payments are facilitated through Visa+ Payname, which is a “receive” only personalized payment address.

Individuals transacting through a participating app. As we reported at the time, upon sending a payment, the sender’s app “calls” the Visa+ service, requests an underlying token, at which time the sender’s app “pushes” payment through to the recipient’s wallet, which is then credited to their account in real time. Western Union is among the partners that will integrate Visa+ within its platforms. In separate research, Visa noted earlier this year that 53% consumers use digital apps to send and receive money around the world, while 34% go to a physical bank or branch.

And Remitly, which enables online remittances across 170 countries around the world, reported results for the first quarter that ended in March that showed that active customers increased to 4.6 million, from 3 million, up 50%. Send volume surged 40% to $8.5 billion.