As at 2024, there were about 304 million international migrants. And as they work and earn, they send some money to families back home to support them, boost their businesses, and even enrich their local communities. This flow of money from resident countries to home countries now sustains a continuously growing international remittances market.
What are international remittances?
In this context, international remittances (or personal remittances) refer to cross-border transfers made by migrants, especially to their families back home.
Typical of markets catering to hundreds of millions of people, the remittance market is sizable. In fact, in 2023, the global value of international remittances was $857 billion, 76.5% ($656 billion) of which went to low- and middle-income countries, according to the Global Migration Data Portal.
These remittances have become a lifeline for many families living in low- and middle-income countries, with remittances accounting for over 30% of the GDP of countries like Kyrgyzstan, Samoa, Lebanon, and Tajikistan.
Unfortunately, for many migrants using traditional banks for international money transfer, service charges could be as high as 12% of the transaction amount, according to the World Bank. In some cases, it could be as high as 16%.
High service fees can discourage migrants from sending money back home altogether, negatively impacting the livelihood of families that rely on them.
Today, fintechs are changing the narrative by offering instant international money transfers at fees less than half of what traditional banks charge. In some cases, fintech remittance services offer $0 fees.
Today, we’ll explore how fintechs are improving the remittance experience for senders, but first, let’s take a quick look at why cost matters to everyday people.
Why Cost Matters to Everyday People
Going by the average service cost determined by the World Bank, a migrant sending $200 to their family in India, Nigeria, or Haiti through their local bank could be charged up to 12% of $200 in service fees. That immediately translates to a $24 loss for both the sender and receiver.
Back home, the recipient’s bank or channel might also charge more fees for withdrawal, leading to more losses.
In countries like Nigeria, where most of the population isn’t assured of earning up to $47.91, the monthly minimum wage, the $24 lost in transfer fees could mean a whole lot for the recipient. This is money that could go a long way in handling a good portion of healthcare, schooling, and rental needs.
The point is that with international remittances, every cent counts. And since traditional remittance service providers are finding it difficult to reduce costs, migrants are bound to look for cheaper alternatives.
The Decline of Traditional Remittance Methods
The World Bank established that traditional banks, as a remittance channel, have the highest cost of international money transfers. In fact, it is far cheaper to send money internationally via BOSS Money App and similarly renowned fintech remittance services that have been dominating the market since the early to mid-2010s.
For context, migrants can send money to Nigeria via apps for international money transfer, such as BOSS Money, at a $0 fee on their first few transactions, while also benefiting from better exchange rates and instant transfers.
As fintech remittance firms continue to expand and make these better offers easily accessible to migrants, more migrants will continue to choose fintechs for their remittance needs, gradually reducing the market share of traditional banks in the remittance market.
Currently, the global digital remittance market, driven by fintechs, is projected to keep growing at a compound annual growth rate of 16.7% from 2025 to 2030 to reach $60 billion, according to Grand View Research.
This growth rate foretells an even more exciting and beneficial future for both the fintechs and migrants sending money back home.
But how exactly does continued fintech growth translate to a better remittance experience for senders?
How Fintechs Are Changing the Game for Senders
Externally, fintechs are competitively disrupting the market for traditional channels by offering generally better services at a substantially lower cost.
Internally, the growing number of fintechs also means increased market competition, which drives existing fintechs to keep improving their services if they want to retain their customers.
These improvements are seen in how some of the best online service for international remittances, such as BOSS Money, are delivering their offers:
Lower fees and exchange rates: While banks could charge 12% of the transaction amount on average, fintechs sometimes charge zero fees. With BOSS Money, for instance, U.S. migrants can send money to Haiti for no fee on their first three transactions and also benefit from a better exchange rate.
Speed: The question “how long does an international money transfer take” is fast becoming less of a concern to migrants who can now access instant international money transfer features provided by fintechs. Traditional remittance services, on the other hand, could take up to five business days.
Transparency: Most fintechs are upfront about all the charges, if any, attached to your transaction. Transparent pricing ensures senders understand what the service entails, helping them decide if they should proceed with the transaction, look for an alternative, or add more money to make up for the fees.
Several delivery options: Fintechs like BOSS Money offer various delivery options to meet the varying needs of remittance senders and recipients. Some common delivery channels include bank deposit, cash pickup, home delivery, direct to debit, and mobile wallet.
Convenience: With fintechs, senders can, at any time, initiate a transfer from their smartphones, potentially reducing time wasted on bank trips and queues.
Compliance: Just as with traditional banks, popular fintechs generally meet key regulatory requirements, including KYC and AML compliance.
Security: With their position at the forefront of technological innovations in global finance, each fintech company offers a secure mobile app for international remittances.
In addition to all these, fintechs also cover a wide range of transfer destinations across all the regions, making it possible to send money to historically underserved/underbanked populations.
How Fintechs Achieve Lower Costs in International Money Remittances
From a broad lens, fintechs are complex systems.
However, in comparison to traditional remittance services, fintechs are able to achieve more by keeping things plain, simple, and focused.
As tech-first entities, fintechs generally maintain an online-focused business model, eliminating the need for physical branches, which require a significant amount of resources to maintain.
Additionally, fintechs go a great length to streamline their services to focus on a target market. Where traditional providers might offer remittance services alongside loans, insurance, and savings, fintech remittance service providers generally stick to remittance services, avoiding unnecessary fluff.
Additionally, every other service component necessary to ensure efficient delivery is captured in API integrations and partnerships with third-party service providers, sometimes manifesting as embedded finance.
By developing operations around their technological capabilities and streamlining their offers, fintechs get to operate with considerably lower overhead.
The Impact on Senders and Recipients
Lower international money transfer fees, alongside other offers such as home delivery and cash pickup offered by fintechs, have scored a huge win for the global financial inclusion agenda.
That much is made obvious by the fact that more people are able to make an international money transfer online without suffering substantial losses due to service fees. Furthermore, fintechs are able to reach more rural and underserved regions than most traditional remittance services.
As more families in low- and middle-income countries access more money through remittances, they can afford to spend more, consequently boosting cross-border economic resilience. This is especially the case in countries where remittances have become the lifeline for many families.
The US-Mexico remittance corridor stands out as a typical example of such cross-border economic resilience. Its position as the single most competitive remittance corridor in the world is both a result of high-frequency Mexico-US migration and an influx of fintech providers in the market, leading to lower fees and more remittance services.
Similarly, as fintech services continue to penetrate various low- and middle-income countries, the global remittance market will become even more competitive, potentially creating more benefits for senders and receivers.
Conclusion
The role of fintechs in enhancing price competition in remittance markets for the benefit of senders and receivers cannot be overemphasized.
For one, it is impactful enough to initiate a shift in consumers’ orientation; a shift that favors fintechs over traditional remittances.
However, for fintechs, it’s not just about lower pricing. Renowned international money transfer providers like BOSS Money have proven that affordability can go along with high-quality service. Across the board, fintechs are also offering more speed, transparency, convenience, delivery options, and a wider range of transfer destinations.
Altogether, this makes fintechs irresistible to senders when placed side by side with traditional services.
The fintech remittance market is most likely to maintain its growth trend as newcomers and innovations fuel further competition within the space..
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