International Remittances: How FinTech is Transforming This Essential Industry

Remittances support people and economies worldwide, keeping millions out of poverty. However, the traditional medium involves intermediaries, which spikes transfer fees and transaction times. Luckily, fintech companies like WorldRemit have solved for these issues, and made remittances more accessible globally. Here’s why.

A remittance is defined as the non-commercial transfer of money from a migrant worker sent to their family in their home country. In many cases, this sum of money often makes up a significant part of the household income of the individuals it is received by. Thus remittances help keep millions out of poverty. 

However, originally, a significant portion of the money sent over as remittances was consumed by banks or companies in the name of processing fees and other hidden charges, which is where FinTech companies such as WorldRemit step in. Before the development of the remittance industry through FinTech, $40 billion dollars were lost annually to these banks and companies. Furthermore, transferring money through banks often took days and was only possible if both parties possessed bank accounts, thus restricting access to remittances from those who needed it most.

Why is Fintech Better Than the Alternative?

FinTech companies allow international remittances to be less expensive, faster, and more accessible. Let’s break that down.

The main way fintech companies allow remittances to be cheaper is the lack of expensive fees. Fintech companies are low cost because of their lack of hidden changes and have little or mostly likely no transfer fees. Thus, they allow users to save a significant amount of money in each payment. Furthermore, they have more profitable and competitive currency exchange rates, unlike previous methods. In addition to this, unlike banks, Fintech companies transfer money at a much faster rate. Transactions can take minutes, rather than days. 

Most importantly, remittances are now much more accessible because of FinTech companies, and this is because of the variety of payment methods allowed to users. Over 1 billion people in the world do not have access to bank accounts, and this previously meant they had no access to receiving remittances either. However, FinTech companies such as Worldremit are changing this because they allow users to send money to recipients without a bank account. There are options such as payment through the mobile app where the money is transferred to the app or sending money for cash pickup, which allows recipients to receive the money transferred in cash. Through the increased payment methods FinTech companies allow, remittances are now accessible to a much wider population.

What does this mean for the future?

The use of FinTech in the remittance industry will only continue to rise because of the myriad of benefits it provides. FinTech has already ended the dominance of the use of banks for remittances, and its own usage will continue to grow because of the decreased expense and increased accessibility to remittances it creates. The effects of this will be felt globally. Millions of more people will be lifted out of poverty over time and FinTech will continue to be utilized in various other industries.