Remittances on the Rise: Is Your Financial Institution Ready?

7 Minute read
1 year ago

Every day, more than 250 million migrant workers send money to friends and family back home. This year, the World Bank predicts remittance flows to low- and middle-income countries to reach a record USD 630 billion, with the United States remaining the largest single source of remittances.

While the market opportunity for remittances remains constant, how money is sent is undergoing change. In-person, agent-based cash transfers have become obsolete – replaced during the global pandemic by digital remittance services. These services, embedded by accessing platforms, such as Nium via a simple API, allow financial institutions to offer digital remittance services that feature preferred exchange rates and low transfer fees per transaction.

But, many financial institutions lack the systems to enable a profitable remittance service at the necessary geographic scale, efficiency, and convenience required to win and retain these customers.

Delivering Effective Remittance Services

The nature of remittance services is different from traditional B2B or B2C payments, bringing its own set of customer needs and technical challenges. In order to offer the right service, providers must account for:

  • Scale:
    Remittances are, by nature, diverse. Moreover, they will usually flow from more economically developed countries to less developed ones – meaning banking links may not be as seamless as needed. The top five recipient countries for remittances in 2021 were India, Mexico (which moved up to replace China in second position), China, the Philippines, and Egypt. Banks may lack the scale to move payments at the cost required.

  • Security:
    Remittances are a vital source of income for millions worldwide – and an easy target for fraudsters. The high burden of security requires the ability to monitor vast numbers of payments for fraud, while still delivering a fast, convenient service.

  • Service levels:
    Given that the value of payments for remittance can vary substantially, it’s essential to offer them at a convenient price and service level. As of the second quarter of 2021, the average cost of sending a remittance from the United States to other countries was 5.41 percent of the notional value of the transaction.

  • Payments regulations:
    Providing cross-border payments come with the responsibility of complying with constant complex regulatory changes in countries worldwide; financial institutions need a robust compliance framework to protect customers, prioritize anti-money laundering, and simplify remittance transfers.

Overcoming these challenges requires the right systems – working with the right global payment services partner can open up new opportunities while helping you create a new service line that evolves with your business and the global remittance market.

Choosing the Right Partner- Sending Remittances From the U.S

The landscape for remittances being sent from U.S is showing increased demand and the impact of improved cross-border payments. In order to offer a practical remittance solution, banks and fintechs need systems that can meet the needs of this global, complex market while maintaining the necessary efficiency and service levels required.

  • Real-time functionality:
    Moving money instantly and transparently to where it’s needed, with visibility for customers and control for institutions.

  • Flexible connectivity:
    Given the scale of remittances, your platform needs to connect you to as many regions as possible since building manual APIs will eat into any transaction margin.

  • Risk control:
    With transparency comes the power to automatically detect, quantify and escalate risks as they are detected while remaining globally compliant and efficient.

  • Customer convenience:
    Connections must be seamless enough for customers to manage their global payment services experience through a single platform.

Remittance solutions offered by global payment services partners, such as Nium, have infrastructures built with compliance controls, rigorous due diligence, and best-in-class security to take away the stress of vulnerabilities for financial institutions remitting payments from the United States to countries around the world.

Nium’s global platform is built with worldwide connectivity in mind, for businesses and individuals. Integrating our single-API system enables you to instantly offer access to a huge number of countries, backed up by the core functionality your remittance customers need.

Fast, Flexible, and Secure- How Nium Powers Remittances From the U.S

Partnering with Nium helps to financial institutions capitalize quickly on digital remittance opportunities, with its:

  • Global network of licensing agreements:
    With local partners across various regulatory regions, we have the local expertise to provide options, configurability, and speed to help you find the best channels to pay out remittances from the United States.

  • Locked-in FX rates:
    Protect customers from market volatility by locking in exchange rates and scheduling payouts at a later point in time. You can book an FX rate for an account to give your client the confidence of securing the best conversion value for their USD.

  • Scalable infrastructure:
    Our platform allows the financial institution to initiate single or bulk remittance transfers, allowing you to precisely cater to customer needs and scale payment volume as needed.

  • Payment protection:
    We have several security screening stages and status messages linked to the transaction flow as it passes database and checklist items. All remittances are verified to confirm the transfer is done via valid channels, and if the screening fails for not meeting security requirements, they are automatically blocked.

  • Real-time reporting dashboards:
    Whether you want to assess activity based on account, currency, check balances, etc.- our dashboard has real-time summaries available to ensure your account and reconciliations workflows are fully supported.

  • Automated webhooks:
    Our platform sends notifications every step of the way; there is transparency, accountability, and real-time status updates available so financial institutions can easily track pay outs for their customers.

Through our global payment services platform, remittance customers can pay out in more than 100 currencies to over 190 countries, 100 in real-time, with an unrivaled network of licenses and infrastructure.

Meanwhile, our security system combines human and artificial intelligence to flag risks in real-time with a high detection rate while avoiding false positives, which would otherwise negatively impact our customers and business.

Summary

Digital remittances are replacing traditional in-person transfers; the gaps in the old framework are evident. Young skilled expats in the U.S want an alternative solution to send their loved ones money without the hassles of paperwork, delayed transfers, security lapses, poor FX rates, hefty fees, and mysteries of untrackable payments. 

Easing the way to swift, secure, and straightforward remittance payments is the gateway to onboarding a new generation of customers and building trusted relationships to ensure they stay.

As the market for remittance grows, now is the time to prepare your systems to adapt. To find out how you can help the world pay better, book a consultation with one of our global payment services experts today.

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