Conquering the High Cost of Remittances: 9 Easy Steps

At this year’s European Development Days, IOM and the International Fund for Agricultural Development (IFAD) held a joint brainstorming session on “Remittances and Development in the ACP-EU Dialogue”. This session aimed to find out-of-the box solutions to remittance transfer cost problems.

Question — How do we reduce the price of remittances?

Context: 95% of remittance transactions originate in cash and terminate in cash, in spite of the growing number of electronic options available. Cash is an inherently expensive and inefficient means of transferring money. So why is it still the number one way people choose to send money home?

The discussion was moderated by international remittances expert Leon Isaacs. Participants from Senegal, Barbados, Ghana and elsewhere in the ACP region shared some of their perspectives and personal experiences when remitting money. Some points they raised were:

• Cash is viewed as reliable, tangible and is trusted more than electronic money.

• People don’t use mobile/digital payments because:

• Mobile money or electronic platforms don’t have a face/person to complain to or talk to if needed;
• People don’t like money transfer companies, e.g. there is a type of “cartel” regarding money transfer operators, they are not interested in reducing prices or going into electronic models;
• People sometimes need to remit money at the last minute, and then they might use mobile transfer operator that offers a same-day service;

The group also made the following recommendations:

• Need for greater marketing/awareness/education by the new players in the money transfer market.
• If users identify humans behind the electronic platform and find them easy to access, more users will go into electronic;
• It was reported that telephone banking is a key element in the development of mobile money. In countries where telephone banking operations are established, mobile money is also widely used;
• Make sure that the service works. A number of respondents said that they had used mobile payments and it had not worked the first time. This made them very reluctant to try any service again;
• Access to basic necessities such as electricity and having a mobile phone with internet connectivity are the key for the widespread of the use of mobile money;
• Regulation: it’s very important for the proliferation of mobile money services that governments put in place the necessary conditions to protect the customer whilst ensuring that the climate is not too restrictive.
• Governments need to officially support the work of these new enterprises in order to generate trust in them from the general public;
• Encourage people to use formal remittance channels. Informality arises through exclusion from formal mechanisms. This must be addressed in order to make real progress.

SO NOW WHAT?

This is what we came up with — but what do YOU THINK?

Share your stories, impressions, suggestions and concerns below. Join the conversation and let’s all work toward lowering the price of remittances.

This article is written by Mathieu Jacques, programme manager of the ACP-EU Migration Action. It is the first of a three-part series tackling questions related to remittances and the path towards SDG 10.7. You can also read the original op-ed: The Walls Between Remittances and the People Who Need Them. Stay tuned for pt. II Rethinking Remittances: How We Get Them, How We Use Them.