Foreign remittances are a ‘lifeline’ for millions across the globe, and nowhere is this more evident than in India. In fact, with more than 30 million Indians residing outside the country, India is the world’s largest inward remittance corridor, receiving $87 billion in 2021, according to the World Bank.
When an unprecedented pandemic hit the world in early 2020, there was much concern that debilitating lockdowns would cause declines in remittance flows. However, these fears were unfounded, and remittance flows remained resilient owing to factors including the shift to digital methods of money transfers facilitated by technology-based solutions.
A shift in the remittance landscape
While remittances have existed in both informal and formal ways, the pandemic has accelerated a shift in flows to more formal channels. Thanks to technology, people were able to transfer money using digital cross-border payment services, allowing funds to flow even during lockdowns and travel bans. According to the World Bank, remittance corridors with digital payment options have increased every quarter since 2016, nearly tripling in the last four years.
Rapid innovations that have made transfers cheaper and more convenient are contributing to increased consumer expectations. Consumers are becoming accustomed to improvements in speed, pricing, and transparency across all industries, whether it’s retail, entertainment, or health. Hence it’s only natural they’d come to expect similar for finance and remittances.
Rising up to meet these expectations is a new breed of service providers who are overhauling the industry by combining fair exchange rates with more reliable, fast, and simple ways to securely send money across borders. Companies like Wise have even built alternatives to replace the outdated correspondent banking system, thus eliminating expensive intermediaries and bottlenecks. Companies in this space have plenty more to solve for, and the race is now on to bring prices even lower and offer more efficient and convenient services.
The key to delivering a better experience can be found in digital transformation and strategic partnerships. There have been many technological innovations enabling this for the remittance sector —here’s a lowdown on the latest changes revolutionizing fintech.
Firstly, the development of the Application Programming Interface (API) has impacted the industry significantly. Employing new technology can enhance a bank’s offering, and APIs enable incumbents to collaborate with fintechs, leveraging their innovation to offer an enhanced product offering.
Secondly, countries around the world have made huge leaps in modernizing payment infrastructure. India with her real-time payment rails, Unified Payment Interface (UPI), is a prime example of stellar forward thinking. We have also seen countries in the region such as Singapore allowing non-banks to gain direct access to their real-time payments infrastructure, which enables these providers to offer customers even faster and cheaper international transactions.
Lastly, and perhaps the most underrated shift for consumers has been the elimination of the need to physically visit a bank. Gone are the days of long queues at the banks or having to go to a physical remittance branch to send money. People want to transact money online and on the move with their smartphones.
India is home to one of the most globally-connected populations, and one where technology is the catalyst to ensure consumers get seamless, speedy and transparent remittances. Given the importance of remittances for millions in India and outside, these are exciting times as the fintech sector advances, particularly in the payments space where we’re seeing an emergence of players solving for diverse needs and governmental efforts to facilitate growth through real-time payment initiatives like UPI. The industry is at the forefront of a payments revolution that is only just beginning to give consumers the level of experience they deserve.
(By Rashmi Satpute, Country Manager of Wise India)