Digital Money Transfer and Remittance Market

Market Overview

The global digital money transfer and remittance market size was valued at USD 241.7 billion in 2019 and is expected to grow at a 7.7% CAGR during the forecast period.

Digital Money Transfer involves regulated electronic transactions between two bank accounts located within single or multiple financial institutions. It is a secure, fast, and convenient payment mode. Furthermore, digital remittance has proven to be one of the most efficient monitoring solutions that possess the potential of successfully transforming the global economy. The global demand for digital remittances is projected to increase over the forecast period due to a rising need for easier, reliable, and quicker cross-border monetary transactions. Rapid growth in urbanization and the advent of technology are resulting in a propelled growth of the global digital money transfer and remittance market.

Customer demands and preferences are expected to play a major role in shaping the growth of the digital money transfer and remittance market— particularly in low- and middle-income countries—largely driven by the wave of technology developments in digital payments. Further to this, the constantly developing technology landscape on the backdrop of rising penetration of smartphones and mobile apps will result in a prominent outlook for market players.

Market Dynamics

Rapid Growth in Urbanization and Cross-Border Transactions

The world is undergoing rapid urbanization and industrialization, developing different rural and semi-rural areas globally. People are open to moving cross-border for job search, employment, and starting businesses in various countries and cities. It eventually results in a significant rise in cross-border transactions. Traditionally, cross-border transactions were conducted in high volumes by large companies and authorities like governments. However, the creation of digital platforms has enabled the broad range of ‘micro’ flow of small-sized organizations, including individual goods purchases, microloans, micropayments, and microwork through freelance contracts.

Digital platforms such as Kickstarter, Zopa, and Kiva, have been used to raise money and loans, form cross-borders. Kiva has helped more than 1 million people to transfer money in more than 190 countries. Kickstarter, a crowd-funding platform that connects entrepreneurs to individuals interested in funding their creative projects, has attracted 5.8 million people from 214 countries, who have pledged USD 1 billion to 58,000 creative projects since 2009.

Efforts to Enhance Security During Digital Money Transfer

Some start-ups have already developed software and applications to facilitate international remittance by reducing the time and cost of the process, making the process user-friendly. For example, TransferWise and Wave are start-ups focusing on encrypting financial messages to make the user data safe and non-vulnerable to hackers. In particular, Wave focuses on data security, mobile security, fraud prevention, and bank access security. The company locks up consumer’s data with up to 256-bit TLS encryption.

E-banking system is also putting efforts in improving the advanced encryption standards and security models. E-banking systems are shifting towards using the combination of fingerprint biometric scan and image verification that offer a more secure mechanism for security. Connecting the biometric scanning dongle to the server, automatically check with the mac address of the dongle and username password of the account are matching. Moreover, image verification is done by the user to identify the image provided by the relevant bank and prevent unknown authentication loggings. Besides, the banking system using a PKI to secure the sender and receiver account details.

Regional Analysis

North America is expected to serve as the most lucrative marketplace owing to the early adoption of digital money transfer and remittance platforms and mobile banking applications in the region. Additionally, the adoption of digital money transfer services by large organizations and a few SMEs to automate accounting operations and employee payroll payments in different industry verticals are projected to fortify the regional market share.

The U.S. is currently the most preferred location by international migrants for education and decent-paying jobs. Many multinational and conglomerate organizations have their corporate offices and manufacturing clusters established in the U.S., attracting several migrant laborers within the country. Thus, the U.S. accounts for the largest share of global remittance services.

In 2014, the remittance outflows as cross-border payments were recorded at a staggering figure of USD 56.3 billion. Due to this impressive performance of remittance services, many traditional money transfer companies, prominent banks, and new market entrants provided better and hassle-free remittance platforms with various services, such as card-based remittance, internet banking, and cross-border payments using mobile applications to attract potential customer base towards their service offerings.

Asia-Pacific Is Expected to Develop with a Rapid Pace across the Global Market

Cross-border migration plays a significant role in regional remittance services development. India, China, and the Philippines are identified as the largest remittance receiver nations. In these remittance operations, formal remittances hold USD 165 billion annually. Despite the rise in the number of formal remittance service providers and cost-effective services offered by these market players, several remittance operations in the Asia-Pacific region are carried out using informal remittance services. It can be due to a lack of proper marketing strategy and channel strategy execution by market players to increase direct customer reach to migrant laborers operating in different countries within and outside the region.

The considerable development in the manufacturing and IT sector in the prominent countries are attracting international employees and laborers to operate in these countries, which are expected to boost remittance outflows from countries within the region. In developing economies, substantial increment in the information and communication technology (ICT) to GDP ratio augment the digital money transfer and digitization of the banking sector.

Malaysia, Singapore, and Thailand are among the top 10 economies with the largest ICT to GDP ratio. The massive growth in the ICT industry and continuous efforts to bolster online payment methods, and formalization of the economy are expected to propel the regional digital money transfer and remittance market growth.

Segmental Analysis

The increasing prominence of ACH solutions and remittance information solutions are expected to propel business remittance services applications globally. Automated clearing house (ACH) solutions are used by business operators to accelerate business cash flows and improve internal operational efficiency. ACH solutions enable the business to automate accounting operations and increase financial operation accuracy using electronic payment methods. Organizations such as large enterprises or SMEs use ACH payments and services to manage their business-to-business (B2B) payments and execute other related operations. Established reliable and secure network and development of more intuitive and easy digital payment platforms are strengthening business remittance solutions and service use.

B2B remittances use in developed economies such as the U.S. and Europe for payment optimization is expected to fuel the segmental growth. Payment optimization by integrating automation in the remittance information and electronic payment system is attracting multiple businesses operating in various end-use verticals towards business remittance services.

Impact of covid-19

COVID-19 has impacted every industry in either a positive or negative manner. Several organizations announced layoffs and put their operation on hold in various countries, reflecting the pandemic’s intensity on the world economy. Digital money transfer and remittance is not an exception to the pandemic, especially the worldwide remittance. According to the World Bank, global remittances have observed approximately 20% of sharp decline due to the COVID-19 pandemic. This sharp decline can be attributed to the sudden drop in wages and the employment of migrant workers, who have faced a loss of employment and wages in the host country during the pandemic.

The low and middle economies are expected to fall by nearly 19% of total remittance due to crucial financial losses. Even after the decline in remittance globally, digital money transfer is expected to rise during the forecast period as consumers are shifting from traditional methods to digital money transfer and remittance. Policy measures to encourage the use of digital finance have been undertaken all over the world.