Mobile money
mobile money

A recent report by the GSM Association (GSMA) shows that cost of sending international remittances with mobile money is, on average, over 50% less expensive than using global money transfer operators (MTOs).

The report, “Driving a Price Revolution: Mobile Money in International Remittances”, looks at the impact of mobile money on reducing the cost of international remittances, and finds that in the 45 country corridors surveyed, the average cost of sending $200 using mobile money was 2.7 percent, compared to 6.0 percent using global MTOs.

These lower transaction fees can translate directly into additional income for remittance recipients.

The research suggests that “by increasing competition, leveraging existing networks and infrastructure, and capturing smaller remittance values than traditional players, mobile money providers are strategically well-placed to lower international remittance costs.”

John Giusti, Chief Regulatory Officer, GSMA, explains that “mobile money is one of the most exciting innovations in financial services, with more than 400 million registered consumer accounts across over 90 countries. While today mobile money services are largely used for domestic transactions, international transfers represent the fastest-growing segment of mobile money services.”

According to Giusti, “in just a few years’ time, mobile money has moved from a purely domestic service to one that allows migrants to send remittances between more than 20 countries globally.”

The World Bank says that more than 250 million people live outside their country of birth and regularly send money home, providing a financial lifeline to their families and contributing to the economies of their home countries. In 2015, global remittances totaled US$581.6 billion, of which US$431.6 billion, or nearly 75%, was sent to the developing world.

Giusti continued that “through mobile money services, the industry is directly supporting the goal of expanded financial inclusion for migrants and their families by reducing international remittance costs.”

From a regional perspective, the report shows that Sub-Saharan Africa is the most expensive region to send money to, with an average cost of 9.6%. This “remittance super tax” is even stronger for intra-African corridors, where remittance costs can exceed 20 percent.

It notes that high fees for remittance transactions encourage senders to use informal remittance channels, increasing anonymous cash-based transactions and creating new risks for financial integrity.

As a result, it suggests that reducing remittance fees has become an important international policy objective.

Our research shows that global MTOs tend to offer their services at lower prices in markets where they are in competition with mobile money providers (6.0% compared to 8.2%). This clearly illustrates the need to ensure enabling regulatory frameworks, which promote competition by allowing non-traditional players, such as mobile money providers, to offer international remittance services,

says the report.

Available in 93 countries, mobile money drives financial inclusion by allowing millions of previously unbanked and under-banked people to access formal financial services. Mobile money services are available in 85% of countries where the number of people with an account at a financial institution is less than 20%. At the end of 2015, there were 411 million registered mobile money accounts and 3.2 million mobile money agents who could facilitate cash-in and cash-out services, according to the GSMA report.

The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with almost 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organizations in adjacent industry sectors.