Mastercard Study: Digital Transformation Reshapes Latin American Remittance Landscape
Summary:
Mastercard has published a study highlighting the rise of digital remittances in Latin America, with mobile and internet usage driving a shift from cash to digital transactions. As competition intensifies, trust, regulation, and technology adoption still prove challenging to advancements for crypto players. According to Mastercard, to streamline and lower costs, nurturing digital finance ecosystems in the recipient countries is essential. The company also highlights the need for increased partnership among remittance service providers.
Mastercard has published a comprehensive study on the subject of money transfers in Latin America. The report points out that the rate of remittances in this region is expanding more rapidly than the global mean, and that increased usage of mobile phones and the Internet is poised to shift transactions from cash-based to digital methods. As per the 2022 data, one out of every ten individuals worldwide belongs to a household that earns remittances, accumulating to a total of $831 billion. According to Mastercard, the average expense for transferring remittances to Latin America was 5.8% of the money sent, compared to a worldwide average of 6.3%, with costs occasionally rising as high as 25.5% particularly in less affluent areas.
While competition intensifies, it could lead to a devaluation in prices. The World Bank data used in the report reveals that at least half of the remittances are sent through informal methods. The report also mentions various remittance options hinting at the new landscape of global remittances. At the moment, Latin America receives 43% of its remittances digitally, which is lower than the global average of 52%. By 2026, digital remittances are predicted to generate revenue up to $20 billion.
The report also mentions associations of Circle and SBI Holdings aiming to boost the distribution of USDC in Japan, while MoneyGram and Stellar offer remittances via USDC and SBI Remit through Ripple. Ripple is also leading the innovation curve by exploring potential utilities for the central bank's digital currency, among other more specific projects. The study quotes MoneyGram's Head of Fintech Strategy and Innovation, Luther Maday, mentioning how the use of channels like USDC increases the speed of monetary transactions, which adds extra liquidity to their regular global operations.
Other key players in the Latin American crypto market include Binance and Mastercard itself, which is a partner of wallet provider Belo. Despite these developments, the crypto field is not free from challenges. Trust, compliance to regulations, and technology adoption issues stand in the path of advancement for crypto players and other providers, according to the report.
Furthermore, it says, “The present efforts for digital transformation are confined to the remittance transaction only. To truly transform to digital and bring down costs on a larger scale, it is important to nurture the digital finance eco-systems in the recipient nations.” The report also emphasises that receiving the transferred amount in an account, card, or a wallet won't suffice if the recipient is unable to make digital transactions using the received money.
The report wraps up stating that “an intelligent combination of collaborations among various players” is required by all remittance service providers.
Published At
3/27/2024 12:26:21 AM
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