Mastercard has published a white paper focusing on remittances in Latin America, highlighting the region's rapid growth in remittance rates compared to the global average. The report emphasizes that the proliferation of mobile phones and internet access will catalyze the transition from cash-based to digital remittance options.
As of 2022, one out of every ten individuals worldwide resides in households that have collectively received $831 billion in remittances. Mastercard reveals that the average cost of sending money to Latin America stands at 5.8% of the transferred amount, slightly lower than the global average of 6.3%. However, costs can surge to as high as 25.5%, particularly in impoverished regions.
Despite this, heightened competition occasionally triggers pricing battles among remittance service providers. The report also references World Bank data indicating that at least half of remittances are informally transmitted. It outlines various existing remittance options that signify a burgeoning shift in global remittance practices. Currently, Latin America receives 43% of remittances digitally, compared to the global average of 52%, with digital remittances projected to reach $20 billion by 2026.
The white paper highlights the involvement of various entities in the digital remittance landscape. MoneyGram and Stellar facilitate remittances using USDC, while SBI Remit employs Ripple for similar purposes. Ripple is spearheading initiatives such as the development of central bank digital currencies (CBDCs) and other related projects. Luther Maday, MoneyGram's head of fintech strategy and innovation, underscores the role of channels like USDC in expediting fund transfers and enhancing global liquidity.
Despite the presence of cryptocurrency players like Binance and Mastercard in Latin America's remittance market, challenges persist in the crypto space. Trust issues, regulatory concerns, and technology adoption barriers hinder the progress of both cryptocurrency providers and other remittance service providers. The report underscores the need to nurture digital currency ecosystems in recipient countries to achieve broader digitization and cost reduction in remittance processes.
In conclusion, the white paper advocates for the strategic formation of partnerships among various stakeholders in the remittance industry. It stresses the importance of fostering collaboration to address existing challenges and advance the digitization of remittance transactions, ultimately benefiting both senders and recipients of remittances in Latin America and beyond.
