remittance cost reduction efforts:...
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REMITTANCE COST REDUCTION
EFFORTS: RECENT TRENDS AND PROJECT UPDATES UPDATES FROM THE WORLD BANK
TRENDS INTERNATIONAL REMITTANCE COSTS
RPW GLOBAL AVERAGE AND INTERNATIONAL MTO INDEX
In the Third Quarter of 2016 the Global Average cost of sending USD 200 decreased from 7.60% to 7.42%
The International Money Transfer Operator (MTO) Index decreased from 8.14% to 8.05% in the same period
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RPW CORRIDOR LEVEL TRENDS
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Compared to 2009, the proportion of corridors with an average total cost over 15% has fallen by 13 pp
In 2009, almost 5% of corridors had an average cost over 20%; today, only 1 corridor does
In nearly 80% of corridors, it’s
possible to send remittances
for less than 10%. This was
possible in only 50% of corridors
in 2009
Approximately one third of
those corridors with average
costs in the 5 to 10% range are
within 1 percentage point of
5%; i.e. 30% of corridors in the
5-10% range have an average
total cost between 5.01 and
6.00%
REMITTANCE COSTS BY RECEIVING REGION
Sub-Saharan Africa is the most costly
region to send money to with an average
cost of 9.52%
South Asia is the least costly region to send
money to with an average cost of 5.41%
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COST OF SENDING FROM G20 COUNTRIES IN Q3 2016
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9.66%
5.73%
8.36%6.67%
8.56%
5.98%
11.30%
5.06%
1.71%
4.59%
16.95%
7.35%
6.09%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
From G20 Average
REMITTANCE COSTS BY RSP TYPE
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The cost of sending remittancesthrough Banks increased in thelast year; from 10.64%% in Q32015 to 11.18% in Q3 2016, andremained the most expensiveRSP type
The cost of transferring throughPost Offices increased slightlyin the last year; from 6.04% in Q32015 to 6.36% in Q3 2016, nolonger the cheapest RSP type.
In the same period, the cost ofsending through MTOs declined;6.51% in Q3 2015 compared to6.36% in Q3 2016
The cheapest product types in q32016 were Mobile Operators(4.46%) and Pre-paid Cardissuers (1.75%), but still accountfor a very small share of samplesize
REMITTANCE COSTS BY PRODUCT TYPE
Cash to cash products
remain among the
cheapest ways to send
money with an average
cost of 6.78%
Bank account services have
declined, but remain the most
expensive product type at 8.92%
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UPDATES ON SELECTED REMITTANCE PROJECTS
A PHASED APPROACH TO RPW COVERAGE INCREASE
• RPW coverage was increased from 227 corridors in Q3 2015 to 300
corridors in Q4 2015 and again in Q2 2016 to reach 365 corridors
• This was be the combined result of:
• Adding new sending countries (Kuwait, Sweden, Thailand) and receiving
countries (e.g. Afghanistan, Cambodia, Madagascar, Syria etc)
• Covering new combinations of existing sending and receiving countries (e.g.
Australia to Indonesia, Japan to Thailand etc)
227 Corridors
32 Sending
countries
89Receiving
countriesQ3 2015
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300 Corridors
35Sending
countries
99Receiving
countriesQ4 2015
365 Corridors
48Sending
countries
105Receiving
countriesQ2 2016
SMART – A NEW INDICATOR TO MONITOR PROGRESS
• The Smart Remitter Target (SmaRT)
• Complements existing methods to monitor cost trends
• Draws on lessons learned from operational work
• Maintains focus on cost reduction objectives
• A practical example of the application of SmaRT – Remittances
to Albania
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Sending
Country
Services monitored in
RPW sample
SmaRT-eligible services
Germany 7 3
Italy 18 4
Switzerland 5 2
United Kingdom 15 3
TOTAL 45 12
SENDER’S PAYMENT OPTIONS
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Sender’s payment options Full RPW
sample
SmaRT-eligible
products
Cash 27 8
Bank account transfer, Debit/credit card 4 1
Bank account transfer 10 1
Debit/credit card 3 2
Prepaid card 1 0
TOTAL 45 12
RECEIVER DISBURSEMENT: SMART-ELIGIBLE OPTIONS
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Pre-SmaRT Analysis Post-SmaRT Analysis
PRACTICAL CONSIDERATIONS /1
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8%
• Average cost for all services in Germany-Albania
10.3%
• Average cost for 3 cheapest SmaRT-eligible services
Conclusion
• Lower-cost services available but not accessible for all
# 18
• Available services in Italy-Albania
# 4
• SmaRT eligible services, all cash-based
Conclusion
• Cashless services do not reach all
PRACTICAL CONSIDERATIONS /2
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13% and 20%
• Average and SmaRT avg for Switzerland to Albania
# 2
• SmaRT-eligible services from Switzerland, both cash
9% and 5%
• Average and SmaRT avg for U.K. to Albania
# 3
• SmaRT eligible services from UK, all cashless
Conclusion
• Competition has impact on cost and service types
PROJECT GREENBACK 2.0
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• Project Greenback 2.0 aims at increasing efficiency in the
market for remittances through an innovative approach:
promote change inspired by the real needs of the ultimate
beneficiaries of international money transfers: the migrants
and their families at home.
• Implementation of the CPMI-World Bank General Principles for
International Remittance Services
• Knowledge and intelligence from projects inform policies and
regulatory actions
PROJECT GREENBACK 2.0: KEY RESULTS TO DATE
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• A significant cost reduction achieved even in a competitive
market in Malaysia: <3% in Johor Bahru against >5% in the rest
of Malaysia
• Clear shift to regulated channels from unregulated ones -
Over 104,000 new customers registered during Jan-June 2016
and more will follow in Johor Bahru
• Increasing payment access points in Indonesia where few
access points were available before the launching of the project,
due to partnerships with the private sector
GENERAL PRINCIPLES ASSESSMENTS AND
IMPLEMENTATION
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• CPMI-World Bank General Principles for International Remittance Services are a foundation for reforms
in the remittance market
• Assessments provide insights and recommendations for reforms
• Reforms improve remittance markets and drive the cost of sending remittances down
• Assessments done since last GRWG meeting
• Haiti, Myanmar, Rwanda, Bosnia and Herzegovina, Serbia, Tajikistan, Albania
• Cambodia, Mongolia in the pipeline
• Example of key reforms
• South Africa: regulatory reform – an exemption of Financial Intelligence Centre Act for remittances
• Korea: implementing cross-border links between payment infrastructures for remittances