Author Topic: The Money Transfer Industry  (Read 2528 times)

Offline CGMChick

  • Full Member
  • ***
  • Posts: 374
The Money Transfer Industry
« on: January 08, 2014, 02:11:35 AM »
This is a maintained thread on the global money transfer industry, often called remittances.


The World Bank has been seeking to encourage greater transparency and merchant participation in the global money transfer sector for well over a decade because of several reasons:

* Financial support for developing countries - The annual global money transfer market is estimated at $550bn USD. A signficiant proportion of these remittances are for small regular amounts of between $200 -$400 involving some 230 million migrant workers that work away from home and send money back to support their family and indirectly their local communities.

* Discouraging black markets - International regulatory frameworks have arrived at a figure of $1,000 USD as being relatively safe for not encouraging large scale money laundering activities.

There is broad consensus that individual transactions below $1,000 are generally not an attractive option for laundering vast sums of money, yet at this level it helps migrant workers to access legitimate money transfer options. This in turn helps workers avoid contact with black market money transfer services, which can in themselves be operations for laundering money.

However, accessing legal money transfer services is not always possible, especially in areas where workers are located away from towns and cities with viable and competitive options. Therefore, using a 'risk based' regulation framework has been promoted to encourage new market entrants to solve some of these access to services issues.

* Reducing costs of transactions - Increasing the facilities and available options for remittances increases competition and this in turn reduces the costs of transfers. Increasing competitive options means more money flowing through to developing countries.

Globally, sending remittances costs an average of 8.6% of the amount sent. There are efforts to help promote money transfer services in order to save around $17bn USD each year which is lost in high transaction related fees and foreign currency conversions.

* Supporting key routes The key migrant workers that send money home regularly are typically linked directly to their family and are not second generation settlers.

These economic migrants tend to leave some of the most deprived areas within a country to go and seek work in places where they already know someone, directly or indirectly, who has previously made a similar economic migration journey. As a consequence, there are several key international money transfer corridors. The largest of which is USA to Mexico, and within that the largest sending State has tended to be California.

Supporting key routes includes the promotion of competition, balanced regulatory environment and promoting improvements in finance infrastructure so that families do not have to travel for many hours to collect transfers.


At the macro level, the remittances market has a significant element of structure. Economic migration is focused around people moving to prosperous industrial economies to fill voids in low paid and unskilled sectors that are temporarily (e.g. large scale construction projects) or systemically (e.g. affluent areas seeking domestic help, or factories with sustained output) in demand.

Domestic and International Remittances

Many people think of international flow of money when they think of money transfers.  However, domestic money transfers can be significant, especially in countries such as America, China and India, but also within large economic areas which share common fiat currencies such as the Eurozone within Europe.

Domestic remittances

Domestic money transfers are less profitable because of the lack of additional income that can be derived from converting currencies. There is also competition from transfers made through internet banking and other options such as shared bank accounts.

Domestic money transfer services tend to have:

* High transaction fees
* High demand from the unbanked
* Few competitive options outside of banking
* Friends and family courier options (people sending money home with friends visiting families)

The true scale and market dynamics for domestic money transfers are less known than international money transfers.

It is thought that China has one of the largest domestic money transfer markets because of the high numbers of rural people that migrate to work in factories, have few holidays, leave children with their grandparents and have few opportunities to send money home regularly.

International Remittances

In 2012-2013, some $550bn in remittances was sent around the globe. For many receiving countries, the funds remitted can be worth more than international development assistance.

The top 10 sending countries are:

The top 10 receiving countries are:

Using Digital Coins for Money Transfers

Digital coins can facilitate remittances, either through direct transfer of coins from person-to-person, or as a back-end B2B system for legal money transfer operators.

One of the features of digital currency over the internet is that it can remove technology and cost barriers for small operators and small businesses, such as being tied to specific enabling operators like MoneyGram or Western Union. With digital coins, small operators can enter the market without some of the high cost barriers associated with buying technology platforms, franchise licences and cash access partner options in local countries.

This increases the opportunities for small businesses, but it also means that one of the strong points of digital coins can be utilised - the ability to move small amounts, micro-payments, regularly and at very little cost.

Unless there is a sustainable merchant system that allows individuals to use digital coins to make everyday purchases, which is highly unlikely in the short to medium-term in developing countries, customers will need intermediary businesses to enable transfers and / or to redeem digital coins into fiat currencies.

Efficient money transfer services can be supported by digital currencies which are facilitated by their robust data mining ecosystems such as those seen with Litecoin or Bitcoin which creates the security layers needed.

« Last Edit: January 13, 2014, 05:09:56 PM by CGMChick »