Organized by Mohr World Consulting and the International Money Transfer Conferences (IMTC)
The remittance industry faces many challenges. Specifically, the problems of de-risking, high costs, and access remain daunting. The participants discussed how technology is addressing these issues.
Cryptocurrency. Cryptocurrencies (like bitcoin) are non-cash, decentralized digital money units. They exist outside of national boundaries and central banks, but they can easily be converted to traditional denominations. The benefit of cryptocurrency is that anyone can use it, it is not reliant on a central authority, and it has great transparency and security, because it uses decentralized ledger technology (DLT) to maintain accuracy and cryptography (highly complex mathematics) to maintain security. Cryptocurrencies are subject to fewer intermediate agents (thus lower costs) and do not require traditional bank accounts (thus no problem of de-risking).
Mobile money. With so many mobile devices in use around the world, even very poor people can access information and accounts. Mobile money is helping to lower corruption, spur economic growth, and spearhead digital inclusion. Beyond direct access to accounts, mobile money opens opportunities to link users to other services such as micro-payments, insurance, financial aid, and humanitarian aid in times of crisis. The biggest problems facing mobile solutions are: a lack of interoperability, the lack of a supporting eco-system (vendors and employers will need to begin using digital money as well), and financial literacy. It is not enough to put a mobile device in a person’s hand, the applications on it must be easy to use and understand.
Interoperability. The remittance transfer system is highly fragmented. With various companies, technologies, and networks, it can be difficult, expensive, or even impossible to perform transactions in many regions. Companies are looking at partnerships in order to find common platforms and open APIs with which to do business. Among other options, partnerships can be bilateral agreements, in which two companies agree to create a direct bridge, or hub-based, in which one company serves as the intermediary between two or more companies and manages any “translation” of information.
To overcome some of the more entrenched problems of remittances and to take advantage of technologies, companies are
- Exploring cryptocurrency technologies as a way to reduce the need for banks;
- Pushing mobile solutions for reaching the unbanked, but with a focus on the particular needs of the user, keeping applications easy to use; and
- Establishing partnerships among FSPs and fintech companies to establish shared networks and common platforms.