Market Research Reports - Ken Research Remittance Industry Analysis

Fin Tech Potential for Cost Reduction in Remittance Market: Ken Research
Introduction: The global remittance market is worth over USD 600 Billion as of 2017 and is
expected to be worth over USD 6 Trillion by 2030 based on information revealed through
various Remittance Industry Market Research Reports. The growing requirement for
remittance services, especially to facilitate economies in low and middle income nations is a top
priority for financial service providers across the globe. Despite the increasing importance given
to remittance transactions, there have been barely any measures working to curb the cost
incurred for remittance based services with the remittance cost globally being around 7.3%
against the targeted 5% globally. While there has been major cost reduction in selective regions
with Russia having a remittance charge of about 1.7% and countries like Mexico and India
having less than 6%, the major issue is for poor economic zones, primarily located in the African
Subcontinent like Tanzania, Nigeria and Angola having rates up to 23%. Aside from these
staggeringly high global averages, even in developed economies, there are instances of high
remittance charges, for example, bank based remittance charge from Japan to China can go up
to 38% of the transaction cost. Aside from the high cost, there is the increased risk of
devaluation due to the foreign currency volatility when having the amount transferred being
traded into local currency which can devalue the remittance amount if there is a increase in the
value of the domestic currency relative to the foreign currency or vice versa which is based on
the time and exchange rate indicated of the currency conversion process. These factors lead to
devaluation of the amount received which cannot be afforded in low and mid income
economies.
FinTech: The emergence of financial technology services has integrated technology into
consumer side financial transactions exponentially. The companies which work as financial
technology service providers have found easy ways of online payment, money transfer,
verification of identity and have helped consumers in understanding the financial services
market better. Online platforms have eliminated the physical need of a financial institution
significantly. Even procedures regarding bank accounts can be handled through a digital device
allowing bank account holders flexibility and accessibility like never before. This technology has
major application into the remittance market.
Market Shift: The global market around remittances is estimated to generate USD 616 billion
in 2018 according to the World Bank. There is a multitude of financial service providers using
technology to redefine the application into the remittance market. One such company,
WorldRemit, a London-based, mobile-first remittance startup valued at about USD 670 million,
which competes with the likes of Western Union and wants to grow its current customer base
of 2 million to 10 million by 2020. The firm offers instant transfers to over 130 million, mainly
“unbanked” individuals through mobile money accounts in emerging markets. More than 65%