Global remittance map, failure of remittance techs to disrupt the market and what role do agent networks play today?
A short study on the back of a recently published IMF paper
I’ve been lucky to participate in building 2 successful digital remitters, C24 and Paysend — going through thick papers published by GSMA, CGAP, World Bank and IMF on the challenges that remittance market face at dawn of the digital push, so I’ve with interest reviewed a recently published IMF paper on the subject: Curb Your Enthusiasm: The Fintech Hype Meets Reality in the Remittances Market
It vividly narrates a story of remtech players largely following the banking correspondent networks: they pushed down the average cost of sending money through major channels — but failed to make an impact on most costly but important corridors in emerging markets. Why is that?
Several factors come to play:
- Overall retrenchment of banks and sizzling of the global correspondent banking network, a result of more watchful application of not only stringent AML directives, but OFAC surveillance — both coming with heavy fines;
- The lack of banking infrastructure willing to make a dent in relatively under-developed regions, resulting in KYC profiles of a receiving party being at best — based on alternative data that is incongruent with bank requirements
- The ensuing bad lemon car situation: bad practices displace good ones. Unavailability of banking network dissalows for building bank-grade identity. Unavailability of identity disallows for bank-grade products provisioning. Disruption did not happen, the market rather evolving slowly.
MTOs, the only who originally invested to build a regulated proprietary network, are slowly digitising their offering and carry a major advantage: a KYC network they can operate for specific remittance user-case.
Those few techs who were able to collaborate with physical agent network — came to reap the benefits of building businesses. Original focus by remtechs to attack bank channels may come to haunt them, as banks are adopting A2A frameworks. A few attempts to render remittance users into full banking with own suite of offers have not been successful for most players.
The holy grail to drive down remittance cost remains the way to build alternative identity models — that would then be accepted as legitimate by international regulation bodies.