Digital Remittance Market

Digital Remittance Market: Opportunities, Trends, and Future Growth

Digital remittance has emerged as a vital channel for cross-border money transfer, disrupting the traditional remittance market that was dominated by money transfer operators (MTOs) and banks. Digital remittance platforms offer low-cost, fast, and secure money transfer services, attracting millions of migrants and expatriates globally.

Current Market Size and Share-

digital remittance market is expected to reach ~USD 8 billion by 2027, growing at a CAGR of +20% during forecast period

Asia-Pacific held the largest share in the market, accounting for around 50% in 2019, and is expected to continue dominating the market during the forecast period. Europe is expected to witness significant growth due to the increasing number of immigrants in the region.

Key Players-

• Azimo Limited
• Digital Wallet Corporation
• InstaReM Pvt. Ltd.
• MoneyGram
• PayPal Holdings, Inc.
• Ria Financial Services Ltd.
• TransferGo Ltd.
• TransferWise Ltd.
• Western Union Holdings, Inc.
• WorldRemit Ltd.

Segmentation-

By Type

• Inward Digital Remittance
• Outward Digital Remittance

By Channel

• Banks
• Money Transfer Operators
• Online Platforms
• Others

By End-use

• Migrant Labor Workforce
• Personal
• Small Businesses
• Others

Major Trends and Drivers Affecting the Industry-

The digital remittance market is being shaped by several trends and drivers, including

Increasing adoption of smartphones and internet penetration: With the proliferation of smartphones and increasing internet penetration, customers are increasingly using digital remittance platforms to transfer money.

Rising demand for low-cost and fast remittance services: Customers are increasingly demanding low-cost and fast remittance services, which has led to the growth of digital remittance platforms that offer these services.

Growing cross-border migration: The growing number of migrants and expatriates worldwide has increased the demand for cross-border money transfer services.

Growing preference for digital payment solutions: Customers are increasingly preferring digital payment solutions due to their convenience, safety, and speed.

Opportunities and Threats in the Industry-

The digital remittance market presents several opportunities, including:

Expanding customer base: Digital remittance platforms can expand their customer base by targeting unbanked and underbanked populations.

Increasing partnerships with financial institutions: Digital remittance platforms can increase their market reach and user adoption by partnering with financial institutions.

Entering new markets: Digital remittance platforms can enter new markets, particularly in emerging economies with high remittance flows.

However, the industry also faces several threats, including:

Increasing competition: With the growing number of players in the market, digital remittance platforms face increasing competition.

Security concerns: The growth of digital remittance platforms has led to an increase in cybercrime and security breaches, which can erode customer trust.

Regulatory risks: Digital remittance platforms are subject to regulatory risks, including compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

Regulatory and Legal Issues Affecting the Industry-

Digital remittance platforms are subject to several regulatory and legal issues, including AML and KYC regulations, data protection laws, and licensing requirements. In the United States, digital remittance platforms are regulated by the Financial Crimes Enforcement Network (FinCEN), while in Europe, they are regulated by the European Union's Payment Services Directive (PSD2).

The digital remittance market is a rapidly growing sector that provides low-cost, fast, and secure cross-border money transfer services to millions of migrants and expatriates worldwide. To better understand this market, it is important to examine the target demographics, their preferences and behaviors, as well as the pricing trends that exist across different segments of the industry.

Target Demographics and Preferences-

The target demographics of the digital remittance market are migrants and expatriates who work in foreign countries and send money back home to support their families. According to the World Bank, there were an estimated 281 million international migrants in 2020, and this number is expected to continue growing. Migrants and expatriates come from various countries and have diverse cultural backgrounds, but they share common preferences and behaviors when it comes to digital remittance services.

One of the key preferences of migrants and expatriates is the cost of the service. Digital remittance platforms offer lower fees than traditional money transfer operators (MTOs) and banks, making them an attractive option for customers. According to a report by the World Bank, the average cost of sending remittances globally was 6.8% in the first quarter of 2020, but the cost can be much higher in some corridors. Digital remittance platforms typically offer fees ranging from 1% to 3%, depending on the corridor and the amount transferred.

Another key preference of migrants and expatriates is the speed of the service. Customers want their money to be transferred quickly, particularly in emergency situations. Digital remittance platforms offer fast and convenient services, with most transfers completed within minutes or hours, compared to several days or weeks with traditional MTOs and banks.

Migrants and expatriates also value the security of their transactions. Digital remittance platforms offer secure and encrypted channels for money transfer, which reduces the risk of fraud and unauthorized access.

Pricing Trends in the Industry-

The pricing trends in the digital remittance industry vary across different segments, depending on the corridor, the amount transferred, and the mode of transfer. Generally, pricing trends in the industry are influenced by several factors, including competition, regulatory requirements, and currency exchange rates.

Competition is one of the key drivers of pricing trends in the digital remittance industry. As the number of players in the market increases, competition intensifies, leading to lower fees and better services for customers. Established players in the market, such as TransferWise and WorldRemit, have disrupted the traditional remittance market by offering lower fees and better exchange rates.

Regulatory requirements also influence pricing trends in the industry. Digital remittance platforms must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations, which can increase their costs and affect their pricing strategies. Some platforms may pass these costs onto customers, leading to higher fees.

Currency exchange rates also affect pricing trends in the industry. Digital remittance platforms typically offer better exchange rates than traditional MTOs and banks, which can reduce the overall cost of the transaction. However, exchange rates can vary widely depending on the currency pair and the amount transferred.

Pricing trends also vary across different segments of the industry. For example, pricing for digital remittance services offered by banks is typically higher than that of dedicated digital remittance platforms. Banks also tend to charge additional fees for their services, such as account maintenance fees and currency conversion fees.

Conclusion-

The digital remittance market is a growing sector that provides low-cost, fast, and secure cross-border money transfer services to millions of migrants and expatriates worldwide.