Global remittance is the transfer of funds electronically between individuals or between corporations. Most of the time, money transferred here is sent overseas to families and relatives. Sending money abroad traditionally is met with many challenges and work. You had to go through manual paperwork, high fraud chances, endless middlemen, and many hidden charges. Fortunately, there have been developments made in the industry to try and reduce all the challenges and enjoy faster and cheaper money transfer services. Technology gives you a chance to transact through value-added foreign money remittance services. The services now can be done through customer-to-customer options. In the past banks, large corporations, and governments were the only organizations that could access institutional foreign exchange markets. Right now, individuals can access the market, which transacts around $4.8 billion daily.
To put it into perspective, a teacher in Boston sends money to Kenya, and then a mobile transfer operator cashier counts the equivalent of the amount in Kenyan shillings and gives it to the recipient minutes later. That is how convenient MTO’s like Western Union are to the user. It has not always been that easy and the steps taken to reach this point have taken some time. There are different laws and jurisdictions that the information is passed through intermediaries before global remittance is done. The global payment network involves understanding the laws of the places you intend on transacting.
The growth of MTOs like Western Union has been largely influenced by consumer-to-consumer transactions. Having consumer services at the forefront of the digital transformation means that many consumers will trust the MTOs over the traditional banks. The transaction process takes minutes and the chances of fraud are very low. With time, the growth of the C2C transactions grew to almost 80% of the total transactions that Western Union handles. There is also a big majority of clients who use the Western Union website to handle their global remittances. The MTOs are enhancing customer‘s digital experience through faster registration, visualizing transactions, and optimal web performance for the clients who use websites to transact. The improvements of services ensure that the clients keep on signing up and using services, which has led to the growth of the largest digital global payments network that we see today.
The fact that there are over 160 countries that have MTO services means that transferring money abroad will generally shift to here If banks and financial institutions do not come up with faster and cheaper ways to send money abroad. Many banks and financial institutions are partnering with MTOs to help them in global remittance. This is mainly because of the fact that the MTOs have global payment networks that work. For example, Western Union recently partnered with Saudi Digital Payments Company, which is a subsidiary of Saudi Telecom Company. Saudi Arabia has many immigrants who need to send money to their home countries regularly. With this partnership, the people have an easier way to send and receive money from all over the world. The idea of the MTOs partnering with banks and other financial institutions is to give them turn-key solutions to moving money between countries.
The MTOs are cheaper than traditional methods of sending money abroad. There are ways that companies like Western Union or Moneygram have negotiated with governments on fees. Transferring money through banks and other financial institutions is expensive and hence MTO’s have an upper hand.
The expansion of the global payments network is also made easier with how transactions can be done across different currencies. For example, Western Union has over 150 million customers globally who transact across 130 different currencies. This makes it very easy to expand operations since they have technology backing their digital payment platforms and that makes them front-runners in the global remittance market.
With the growth of the MTO platforms, many consumers are slowly adopting the platforms because they are built on trust and reduced fraud chances. The growth of this market is slowly forcing traditional players to evolve.