Remittances — Can the industry meet the demands of consumers and regulators?

Abstract

This paper examines the role of private banking institutions in the worldwide remittance business. Remittances play a significant role in the financial welfare of individual recipients and their families, and on occasion their wider communities, to the point that the G8, along with supra-national financial bodies such as the World Bank, now consider remittances to be an area of public policy. Although the market is currently served by a number of service providers of varying degrees of formality, there is an opportunity for private banks to enter the space and offer parallel services, thus increasing competition and lowering costs. Nonetheless, the remittance business is not one to be undertaken lightly: as well as the opportunities that are presented by remittances, there are a number of challenges to be overcome. This paper considers the advantages to both remitters and recipients brought about by increased involvement of banking institutions — primarily reduced costs, increased financial literacy and a degree of poverty alleviation. It examines the nature of the challenges that banks face, and the infrastructure, systems and processes that are required. Finally, it assesses the likely nature of banking involvement, and presents a view of the collaborative relationships that are likely to develop between different banks to deliver comprehensive remittance services.