Digital remittances, cross-border payments

BY: Kwami Ahiabenu II (Ph.D)
File photo
File photo

Imagine standing in a long queue for long hours to send or receive money. This situation was the norm for many years until the advent of digital remittances.

Since then, there are far greater options for sending and receiving money across borders. Digital remittances allow senders to sit in the comfort of their home or office and send money online to recipients directly on their mobile phones or their bank accounts.

Every year, millions of people migrate from their home countries, and they inevitably maintain strong ties with these countries, including sending funds back home.

According to the World Bank, even as the world is experiencing severe recession due to the COVID-19 pandemic, remittances to low and middle income countries are projected to reach $589 billion by the end of 2021, growing by 7.3 per cent.

However, the cost of remittances is very high, estimated at 6.4 per cent on the average over the first quarter of 2021 globally and eight per cent for sending remittances to sub–Saharan Africa (

Given this high cost, it is inevitable that the sender of remittances is always on the lookout for a mechanism to send funds more cheaply.

Digital remittances

Digital remittances are driving many innovations, cost efficiency, convenience and speed.

Historically, remittances relied heavily on technologies to drive the service. For example, Western Union, as the pioneers of money transfer in 1871, made use of technology even then.

An industry association, the International Association of Money Transfer Networks ( reported that in 2020, 40.2 per cent of remittances which were previously transferred as cash took digital forms.

The acceleration in digital remittances is due to many reasons, including the COVID-19 pandemic, which necessitates the transfer of money digitally since face-to-face means were not possible, mainly due to lockdowns. Therefore, the market for digital remittances is seeing exponential growth, with the global market size of digital remittances expected to reach $ 42.46 billion US by 2028 (

The remittances market saw a systemic change when thousands of FinTech firms or digital-first Money Transfer Operator (MTO) entered the market place mostly providing digital remittance and radically changing the face of remittances.

This means foremost incumbents such as Western Union and MoneyGram, who dominated the remittances market for many years, raced to change their business model while investing heavily in digital remittances. Furthermore, emerging technologies such as big data automation, Artificial Intelligence (AI), machine learning, blockchain and Distributed Ledger Technology (DLT) are now being used by some remittances companies to improve service delivery.This led to reduced costs and transfer time, improved security and real-time data needed for clients' onboarding, meeting compliance standards, meeting Know Your Client (KYC) requirements efficiently, and improving clients' satisfaction.

Digital remittances come with several advantages, including faster funds transfer, ease of transactions, relatively cheap cost of transfers, ability to track and trace the status of remittances and more secured transactions.

Although the cost of digital remittances is somewhat lower, cost remains a challenge impacting digital remittances' rapid uptake largely because some users expect small transfer fees or no fees, meaning they are inclined to use the informal mechanism of transfers. Other challenges impacting digital remittances negatively are regulatory complexities, the preference for informal remittances, clients' low digital literacy level and de-risking.

In conclusion, although digital remittances ensure access and relatively cheap ways of sending funds across borders, informal and cash means of transfer still hold sway. Therefore, for digital remittances to take over cash, it must ultimately provide innovations in enabling cash-like remittances.

Kwami Ahiabenu, II (Ph.D.) is a Tech Innovations Consultant. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.