REMITTANCE COST REDUCTION EFFORTS: RECENT TRENDS AND PROJECT UPDATES UPDATES FROM THE WORLD BANK
TRENDS INTERNATIONAL REMITTANCE COSTS
RPW GLOBAL AVERAGE AND INTERNATIONAL MTO INDEX In the Third Quarter of 2016 the Global Average cost of sending USD 200 decreased from 7.60% to 7.42% The International Money Transfer Operator (MTO) Index decreased from 8.14% to 8.05% in the same period 2
RPW CORRIDOR LEVEL TRENDS In 2009, almost 5% of corridors had an average cost over 20%; today, only 1 corridor does 3 Compared to 2009, the proportion of corridors with an average total cost over 15% has fallen by 13 pp In nearly 80% of corridors, it s possible to send remittances for less than 10%. This was possible in only 50% of corridors in 2009 Approximately one third of those corridors with average costs in the 5 to 10% range are within 1 percentage point of 5%; i.e. 30% of corridors in the 5-10% range have an average total cost between 5.01 and 6.00%
REMITTANCE COSTS BY RECEIVING REGION South Asia is the least costly region to send money to with an average cost of 5.41% 4 Sub-Saharan Africa is the most costly region to send money to with an average cost of 9.52%
COST OF SENDING FROM G20 COUNTRIES IN Q3 2016 18% 16% 16.95% 14% 12% 11.30% 10% 8% 9.66% 8.36% 6.67% 8.56% 7.35% 6% 5.73% 5.98% 5.06% 4.59% 6.09% 4% 2% 1.71% 0% From G20 Average 5
REMITTANCE COSTS BY RSP TYPE The cost of sending remittances through Banks increased in the last year; from 10.64%% in Q3 2015 to 11.18% in Q3 2016, and remained the most expensive RSP type The cost of transferring through Post Offices increased slightly in the last year; from 6.04% in Q3 2015 to 6.36% in Q3 2016, no longer the cheapest RSP type. In the same period, the cost of sending through MTOs declined; 6.51% in Q3 2015 compared to 6.36% in Q3 2016 6 The cheapest product types in q3 2016 were Mobile Operators (4.46%) and Pre-paid Card issuers (1.75%), but still account for a very small share of sample size
REMITTANCE COSTS BY PRODUCT TYPE Bank account services have declined, but remain the most expensive product type at 8.92% Cash to cash products remain among the cheapest ways to send money with an average cost of 6.78% 7
UPDATES ON SELECTED REMITTANCE PROJECTS
A PHASED APPROACH TO RPW COVERAGE INCREASE RPW coverage was increased from 227 corridors in Q3 2015 to 300 corridors in Q4 2015 and again in Q2 2016 to reach 365 corridors This was be the combined result of: Adding new sending countries (Kuwait, Sweden, Thailand) and receiving countries (e.g. Afghanistan, Cambodia, Madagascar, Syria etc) Covering new combinations of existing sending and receiving countries (e.g. Australia to Indonesia, Japan to Thailand etc) 32 Sending countries Q3 2015 89 Receiving countries 35 Sending countries 99 Receiving countries Q4 2015 48 Sending countries 105 Receiving countries Q2 2016 227 Corridors 300 Corridors 365 Corridors 9
SMART A NEW INDICATOR TO MONITOR PROGRESS The Smart Remitter Target (SmaRT) Complements existing methods to monitor cost trends Draws on lessons learned from operational work Maintains focus on cost reduction objectives A practical example of the application of SmaRT Remittances to Albania Sending Country Services monitored in RPW sample SmaRT-eligible services Germany 7 3 Italy 18 4 Switzerland 5 2 United Kingdom 15 3 TOTAL 45 12 10
SENDER S PAYMENT OPTIONS Sender s payment options Full RPW sample SmaRT-eligible products Cash 27 8 Bank account transfer, Debit/credit card 4 1 Bank account transfer 10 1 Debit/credit card 3 2 Prepaid card 1 0 TOTAL 45 12 11
RECEIVER DISBURSEMENT: SMART-ELIGIBLE OPTIONS Pre-SmaRT Analysis Post-SmaRT Analysis 12
PRACTICAL CONSIDERATIONS /1 8% Average cost for all services in Germany-Albania # 18 Available services in Italy- Albania 10.3% Average cost for 3 cheapest SmaRT-eligible services # 4 SmaRT eligible services, all cash-based Conclusion Lower-cost services available but not accessible for all Conclusion Cashless services do not reach all 13
PRACTICAL CONSIDERATIONS /2 13% and 20% Average and SmaRT avg for Switzerland to Albania # 2 SmaRT-eligible services from Switzerland, both cash 9% and 5% Average and SmaRT avg for U.K. to Albania # 3 SmaRT eligible services from UK, all cashless Conclusion Competition has impact on cost and service types 14
PROJECT GREENBACK 2.0 Project Greenback 2.0 aims at increasing efficiency in the market for remittances through an innovative approach: promote change inspired by the real needs of the ultimate beneficiaries of international money transfers: the migrants and their families at home. Implementation of the CPMI-World Bank General Principles for International Remittance Services Knowledge and intelligence from projects inform policies and regulatory actions 15
PROJECT GREENBACK 2.0: KEY RESULTS TO DATE A significant cost reduction achieved even in a competitive market in Malaysia: <3% in Johor Bahru against >5% in the rest of Malaysia Clear shift to regulated channels from unregulated ones - Over 104,000 new customers registered during Jan-June 2016 and more will follow in Johor Bahru Increasing payment access points in Indonesia where few access points were available before the launching of the project, due to partnerships with the private sector 16
GENERAL PRINCIPLES ASSESSMENTS AND IMPLEMENTATION CPMI-World Bank General Principles for International Remittance Services are a foundation for reforms in the remittance market Assessments provide insights and recommendations for reforms Reforms improve remittance markets and drive the cost of sending remittances down Assessments done since last GRWG meeting Haiti, Myanmar, Rwanda, Bosnia and Herzegovina, Serbia, Tajikistan, Albania Cambodia, Mongolia in the pipeline Example of key reforms South Africa: regulatory reform an exemption of Financial Intelligence Centre Act for remittances Korea: implementing cross-border links between payment infrastructures for remittances 17