Mumbai: In 2018, India is likely to retain its top spot, with remittances expected to reach $79.5 billion this year, followed by China ($ 67.4 billion), Mexico and the Philippines ($33.7 billion each), and Egypt ($25.7 billion), according to World Bank’s Migration and Development report. Despite an increase in volume, the global average cost of sending $200 remains high at 6.9% in the third quarter of 2018. Reducing remittance costs to 3% by 2030 is a global target under Sustainable Development Goal (SDG).

High cost for sending money

The cost for sending money to South Asia was the lowest at 5.4%, while Sub-saharan Africa continued to have the highest average cost at 9%. Remittance costs across many African corridors and small islands in the Pacific remain above 10%, due to the low volumes of formal flows, inadequate penetration of innovative technologies, and lack of a competitive market environment, finds the report.

Though South Asia had the lowest average remittance costs of at 5.4% in the third quarter of 2018, it is still higher than the 5.2% costs seen in the previous quarter and a reversal of the steady declines seen since the second quarter of 2017.

According to the report, clearly there is no room for complacency in attempts to achieve the SDGS’ targets for reducing remittance costs.

“Some of the lowest-cost corridors, originating in the GCC and Singapore, had costs below the SDG target of 3% owing to high volumes, competitive markets, and deployment of technology," finds the report.

Also remittance to South Asia is expected to rise by an estimated 13.5%, with remittances to both India and Bangladesh to double digits.

What next?

According to a Bloomberg report, Facebook Inc. is working on making a cryptocurrency that will let users transfer money on its Whatsapp messaging app, focusing first on the remittances market in India. This is not the first time companies are trying out different ways to reduce cost.

In the last two-three years, financial institutions and finch companies have been trying to use online platforms and block chain technology to send and receive money in a bid to reduce cost and time. There is still a section of individual who don’t trust block chain and cryptocurrencies.

Hence, it will take longer to implement these newer technologies. Also there has been very little interest in remittance for the finch sector. In terms of funds, remittance saw the lowest inflow from investors in 2018 while it was led by lending and payments.

However, currently remittance through a banking channel continues to remain expensive and time consuming. The cost is unlikely to come down further for remittances anytime soon unless a technology development takes place and gets implemented across the globe.

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