There’s no two ways about it: technology has dramatically reshaped daily life, in just about every area — our finances and the way we handle money, most definitely included. Over the last decade, for instance, there have been significant changes in the way we send money across borders and how we make remittances from one person to another. Additionally, the effects of the post-pandemic era — including macroeconomic trends like migration and labor mobility — have likewise caused noticeable shifts in the business of cross-border payments. These shifts are especially marked in the Asia-Pacific (APAC) region, where the peer-to-peer (P2P) remittance landscape has changed more rapidly than any other region and is growing faster than ever.
That said, how can banks, remitters, and fintechs better-serve their customers and leverage all the opportunities these changes present?
Let’s look at some data collected, as part of the Global Market Sizing Analysis commissioned by Visa in 2022. The figures show a potential seven percent year-on-year growth in remittance volume in Asia-Pacific, which tells us that remittances have not slowed down, post-pandemic, contrary to earlier predictions. This uptick may be attributed to the high migration rate of Asian workers, which has, in turn, led to large numbers of workers sending regular remittances to their families, back home. For instance, according to the World Bank, India received $89.4bn in remittances in 2021, and was on track to receive $100bn in 2022. If this is any indicator, then it may be safe to forecast the same behavior across other parts of the region with large representations of workers overseas. The same is also true for those countries with a chunk of its student population studying abroad.
“It’s no surprise that Asia-Pacific is one of the largest net-receive regions globally, with Asian students making up around 53 per cent of foreign students enrolled in educational institutions worldwide and families, scholarship bodies and other entities sending money digitally and cross-border to support them,” shared Deepan Dagur, Vice President, Head of Visa Direct, Asia Pacific at Visa. “Additionally, the prevalence of digital wallets and credit or debit cards has made P2P remittances possible for the many people in Asia-Pacific who don’t have a bank account, further contributing to the remittance flows.”
“Microtized” transaction sizes
Another noticeable trend is that as the overall volume of payments or remittances increases, the average transaction amount decreases. In fact, 90 percent of all cross-border payments are now valued at less than $100,000. This trend towards payment “microtization” — defined as the tendency of computers and other forms of technology to become even smaller — is largely driven by technological advances in P2P remittances. That is to say, current technology has made it easier and more cost-efficient for people to send money overseas. This, in turn, has led to increasing consumer demand for remittance services. To put it plainly: more people are now more likely to send remittances more frequently, given the ease and convenience of the process. Let’s compare this to a decade ago, when it was more difficult and more expensive to send money abroad. Let’s say, for example, that a parent was making a payment to their child studying overseas — that parent would have more likely made larger but less frequent payments, given the cost and the hassle of the transaction, back then. This is how technology has made an impact upon the behavior of remittance senders. App-based digital remittances have made it easier and cheaper to send money, driving the increasing frequency of remittances to and from the Asia-Pacific region.
To illustrate, according to a recent Visa research report, Money Travels: 2023 Digital Remittances Adoption, 43 percent of surveyed consumers in Singapore now use a payments app to send money at least once a month. “When transactions can be executed from a mobile app, where the cost is single-digit dollars and funds are received on the same day, it’s clear to see why transaction volumes increase, albeit with smaller average ticket sizes,” Dagur noted.
Opportunities for payments businesses
Given these shifts in the remittance landscape, payment services providers now have an opportunity to develop an infrastructure that is better-suited to the evolving nature of small-ticket, high-volume remittances.
P2P remittance senders in Asia-Pacific are increasingly drawn to platforms and services that are fast and locally relevant, and have appropriate fee structures. As such, providers that can seamlessly process rapidly rising volumes of smaller but more frequent cross-border remittances will have a clear advantage. With the ability to send real-time funds safely, conveniently, and directly to financial accounts using card credentials, Visa Direct is in this space. Moreover, Visa Direct has been leveraged by payments businesses to enhance both domestic and cross-border money movement with near real-time capabilities.
Visa works closely with banks, fintech companies, and merchants across the Asia-Pacific region to help them respond to opportunities. As one of the world’s largest digital payment networks, the company can help P2P remitters send money directly into 2.5bn bank accounts, 1.5bn digital wallets, and 3bn credit or debit cards across 180 different countries and territories. “We’re in the business of giving banks and fintechs a choice that allows them to compete with other offerings,” Dagur pointed out. “Because they’re in a competitive market where they are trying to build market share while keeping their customers happy.”
Find out more about Visa Direct here.
ADVT.