As the world becomes more connected than ever, money is rapidly becoming borderless. The rise of migration, coupled with the expansion of trade around the world, has fueled the enormous movement of money across borders – and much of this is remittances. Remittances often flow from developed to developing economies as migrant workers send money back to their families back home.

Remittances are so important that in recent years they have contributed more to the economies of some countries than foreign aid.

Data released by the World Bank in 2018 shows that remittance flows to low- and middle-income countries hit an all-time high of $529 billion, the result of exciting innovations for allows sending and receiving remittance payments globally.

Remittances: an industry in motion

While there have been some interesting recent developments in the remittance industry, the process needs to become fairer.

The costs incurred are often very high. In fact, in 2021, the World Bank reported an average cost of €6.38 for funds sent, which significantly reduces the purchasing power of the recipient. This is too high a rate, especially because it is more and more common for low-income workers to repatriate money.

Finally, some premium options appear. We have seen the immediate impact of alternative assets like cryptocurrencies reshaping the remittance industry. Due to its borderless nature, it has helped to facilitate fast transactions and reduce cross-border remittance fees. Digital currencies – including Bitcoin, Dash and Cardano – can be sent abroad at a fraction of the cost and time compared to what is offered traditionally. At the heart of improving the remittance industry is the implementation of the underlying blockchain technology – and the benefits cannot be underestimated. Blockchain can be used in many ways to seamlessly transfer ownership of crypto assets from one person to another. It allows peer-to-peer transactions without an intermediary, which often increases transaction costs and time.

New technologies will continue to provide a much-needed modern resource into a relatively backward industry, facilitating high-speed, high-speed transfers with no hidden fees. Existing market leaders like Western Union will struggle to keep up with what this evolving technology has to offer.

Unlocking the potential of emerging economies

For many developing countries, the remittance industry plays an important role in contributing to the health and growth potential of the economy. One report indicates that remittances are equivalent to more than 10% of the GDP of developing economies in a year. Once the money is in the country, it will boost national economic growth.

Perhaps the most important contribution of remittances to a developing economy is the provision of capital for start-ups. With higher disposable income in hand, recipients can pursue entrepreneurial ventures that enable developing economies to benefit from increased employment opportunities, increased competition, and increased innovation. and entrepreneurship. Remittances can also help countries achieve the 17 Sustainable Development Goals (SDGs) set out by the United Nations in 2015, at both the household and community levels. In the past, remittances contributed up to 60% of the recipient’s family income, providing many benefits in the future, and contributing to the achievement of SDG goals. This includes reducing the depth and severity of poverty, improving health and well-being, and providing quality education.

At the community level, it also stimulates progress. For example, remittances are more often used to improve homes than to buy homes, which means households have better access to affordable and clean energy. Furthermore, as families increase their ability to shop, communities change their consumption patterns, which in most cases leads to responsible consumption and production.

Remittances can therefore act as the backbone for the development of emerging economies at the national, community and household levels.

A fairer and more transparent future

We’ve seen fintech startups looking to capitalize on a booming opportunity in the remittance industry. Addressing unfair practices in the money transfer industry – such as high costs and hidden fees – will allow those who need it most to keep their hard-earned money. Increased competition in the remittance industry should be seen as a positive – it forces companies to offer fairer services, at lower rates.

Not only can it provide better solutions for users to transfer money, but it also offers lucrative business opportunities with plenty of space for disruptive and innovative businesses to create a conversion effect.

The use of blockchain technology in the remittance industry has certainly pushed the industry in the right direction – and in the years to come it will encourage a fairer, safer and more transparent alternative to what is currently available. currently available in the market.