Digital Cash and Remittances

Digital payments have a host of benefits over cash ,from being automated to be tracked and applied to invoices, to having lower fees than checks or cash deposits, to having the payment confirm at a moments notice.

Sending money home helps hundreds of millions of people save their lives and supports economic growth. With the help of technology and regulation, remittances can become more affordable and affordable for all.

Lower Fees

Remittances bring income to households, communities and nations, but they can be too expensive for some beneficiaries. Lowering those costs would make way for more universal forms of financial inclusion and stability.

The fees are usually three-fifths to two-thirds of the remittance cost; banks, the biggest formal provider, followed by money transfer companies and post offices/microfinance centres; digital technologies like mobile wallets can be less expensive.

BRAC Bank found in 2022 that sending $200 via mobile money platforms is more affordable than transferring money via banks (11.8%), post office (8.3%) or money transfer operator (5.3%). A lax pricing model is required to mitigate these costs; accounting for local differences and customers and adapting to riskier compliances, such as anti-money laundering/know-your-customer rules, may allow more agnostic service delivery and ensure benefits are shared with vulnerable migrants (especially female migrants).

Accessibility and convenience.

Sending remittances was once an expensive exercise in travelling, involving many flights and stops at agents – especially for those on lower incomes who received their remittances in the form of cash. These can be considerably reduced with digital remittance services: $200 sent electronically costs on average around 6 per cent less than in-person cash.

Digital remittances also come at a better price and with more convenience than conventional remittances. If a traditional recipient needs to collect the funds directly from a bank or post office before they can receive their payment in traditional ways – electronic transfers can be made and received through online portals or mobile apps.

Competition among remittance providers has resulted in lower digital remittance fees especially in countries where mobile money providers have emerged. Message money remittances were the least expensive formal mode (6.1 % in 2022). This represented a remarkable saving from the old channels (which had a price tag of 11.8 per cent). And, mobile remittances are always available, unlike the other modes.

Speed

Families and communities worldwide are helped by remittances. But alas, because of some restrictions (high cost or slow processing) some can become unavailable.

New technology reduced the price dramatically, and made life more comfortable for migrant as well as recipient. Digital remittance services leverage digital platforms to send money from one recipient to another, without having to navigate through banks or in-person money changers – delivering greater transparency, transparent fee structures, fair exchange rates, advanced encryption and increased cybersecurity for both ends.

Thus, remittances delivered by electronic channels come much sooner than those via banks and post offices. ‘It was cheaper to pay $200 with a mobile phone than you would pay to the bank, the post office or the money transfer company,’ according to a 2021 study. Other savings can be realized by boosting competition among RSPs, PPPs or more money education targeted at specific migrant/diaspora populations; and even addressing barriers such as identity signature controls that derail a complete digitisation of Remittance services.

Security.

Remittances is huge in size and beneficial, but also has many barriers in front of completing the digitalization of it: transparency, trust and security in the platform; negative user experiences; slow processing speeds; regulatory or operational inconsistencies and regulatory inconsistencies, which prevents digital money movement solutions from reaching weak populations.

Digital money transfer : Unlike a traditional money transfer with physical cash and multiple people, digital money transfer can be transmitted 24/7 through the mobile app or online portal. But their availability might remain constrained by cultural and social digital exclusionary impediments (eg, gender disparity in account ownership, or lack of mature financial and mobile networks). Distrust in technology may also slow adoption, and this will need more investments in this area. But online alternatives are getting more popular and cheaper; perhaps in the future these technologies can even combat financial exclusion by offering mainstream banking.