Mastercard has recently published a comprehensive white paper discussing the topic of remittances in Latin America. According to the report, the region is experiencing a faster growth rate in remittance rates compared to the global average. The increasing penetration of mobile phones and the internet is expected to drive a shift from cash to digital alternatives.
As of 2022, approximately one in ten people across the globe resides in a household that receives remittances, with a total value of $831 billion. The average cost of sending remittances to Latin America stands at 5.8% of the transferred amount, slightly lower than the global average of 6.3%. However, in certain cases, these costs can rise as high as 25.5%, particularly in the most impoverished regions, as highlighted by Mastercard.
Interestingly, the report also draws attention to the growing competition within the remittance market, which has at times resulted in a race to the bottom in terms of pricing. Additionally, data from the World Bank reveals that at least half of remittances in Latin America are transmitted through informal channels.
The white paper identifies various existing remittance options that collectively indicate the emergence of a new reality in global remittances. Currently, Latin America receives 43% of its remittances digitally, compared to the global average of 52%. It is projected that digital remittances will reach a value of $20 billion by 2026.
The report mentions several key players in the Latin American market, such as Circle, SBI Holdings, MoneyGram, Stellar, Ripple, Binance, and Mastercard itself. These entities are actively involved in facilitating remittances through partnerships with wallet providers like Belo. However, the report acknowledges that challenges persist within the crypto field, including issues related to trust, regulations, and technological adoption, which hinder the progress of crypto players and other service providers.
Furthermore, the report emphasizes the importance of not only delivering funds to recipients through various means such as accounts, cards, or wallets but also ensuring that these individuals can make digital payments when utilizing the received funds.
In conclusion, the report emphasizes the need for remittance providers to establish strategic collaborations with diverse entities in order to navigate the evolving landscape successfully.