How online money transfer services can improve the economy in Latin America
Remittances from Latin America surged to an all-time high of $80 billion in 2017 — an 8.6% increase, according to the 2018 Transit Migration Report published by the Global Knowledge Partnership on Migration and Development.
But how do digital remittances through money transfer specialists like WorldRemit help improve the economy in Latin America?
In two ways, it turns out: They save foreign workers and their beneficiaries money and time and allow more money to reach the country, bypassing exorbitant fees.
How do digital remittances affect the economy?
Active mobile money accounts in Latin America grew 10-fold from 2011 to 2016. That increase has helped over 10 million people send cash to friends and family more efficiently. In that five years, the number of digital money specialists in the region tripled to 30 from the mere 9 in business back in 2011.
While remittance flows into Latin America and the Caribbean grew 8.7% in 2017, growth to Colombia and the Dominican Republic significantly outpaced the rest of the region at 15% and 12.4% respectively — with the bulk of this flowing from the US.
In 2017, money transfers to Columbia averaged $5.4 billion, accounting for 2% of the country’s GDP. That same year, the Dominican Republic received $6.1 billion in remittances, making up 8% of its GDP.
The average cost of sending money to Latin America is about 6% of the transfer amount — or about $12 for average transfers of $200. Shaving just 1% off that fee could result in an additional $54 million to the Dominican Republic and $61 million to Columbia, unlocking great opportunity for residents in both countries.
For context, $61 million in Columbia would set up 40,000 students for success throughout middle school.
WorldRemit is just one money transfer specialist serving Latin America. When sending $200 from the US, customers saved an average $14 to Columbia and $20 to the Dominican Republic. For those who send regular remittances home to loved ones, such savings can be enough to buy a new backpack or schoolbooks for those back home.
Migrants often leave their countries for stronger wages and a better life for their families. Increased migration overall means more cross-border remittances to those they’ve left behind. As access to low-cost digital remittances grows, so too will the amount of money that flows into those countries.
Why online remittances beat in-person transfers
Today’s customers can send and receive digital remittances as easily as sending a text. In fact, recipients can actually receive the credit through a simple text message. These funds can be used to pay bills or purchase goods locally, all using a basic mobile phone. The transaction reference number can even be used to collect cash through a network of local agents — even in remote or rural areas.
Sending money from your phone isn’t only convenient, but it can also save the 30 minutes to an hour required to commute from home to a storefront, not to mention money spent on gas, tolls or public transportation.
Brick-and-mortar services like Western Union are subject to heavy overhead and operating costs. By forgoing retail locations and the employees required to run them, digital providers are in a position to provide fewer transaction costs and stronger exchange rates when compared with traditional providers. Making them more robust is the technology they use to verify and automate transactions quickly and securely.
Services like WorldRemit are good for migrant workers and good for the economy. They provide an affordable option for sending money to loved ones in around 150 countries worldwide. Lower fees, stronger rates and streamlined transactions allow customers to stretch their hard-earned wages, keeping more money within their families and countries, including Latin America.