Global remittance trends and the role
of African Postal Operators
Marco Nicolì
Payment Systems Development Group
African Conference on Remittances and Postal Networks
Cape Town, South Africa | March 4-5, 2015
Payment Systems Development Group
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A large portfolio
• 100+ countries in all Regions assisted in various projects of reform of their national payments system;
A well-established
program
• Global products: standard setting, GRWG, Remittance Prices Worldwide, Greenback, Global Surveys…
A leading team
• 40+ specialists in payment, securities settlement, and remittance systems
• 18+ years of activity in this space
Working with IFAD, UPU, WSBI, UNCDF on the
African Postal Financial Services Initiarive
Remittances continue to grow:
$438 billion to developing countries in 2014(source: Migration and Remittances Team)
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Why do we care about remittance prices?
• The cost of sending remittances is an indicator of the safety and
efficiency of the market for international remittances
• Lower costs would mean more money in the hands of migrant
workers and their families
• The availability of safe, efficient, reliable, accessible, and cost
efficient means to transfer money internationally could reduce
flows through unregulated channels
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What have we achieved in the last five years?
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In Q4 2014 the Global Average cost of sending USD 200reached 7.99%, down from 8.58% one year ago and from nearly 10% in 2008
The International Money Transfer Operator (MTO) Index reached 8.23%, down from 8.74 one year ago and from over 10% in 2008
Average cost of remittances from nearly 10 to below 8 percent
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Sub-Saharan Africa the most expensive Region,
not showing enough improvement over the last five years
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The cost of sending remittances through Banks showed a considerable decrease of from over 14% to less than 12% since 2008, but still remaining the most expensive type of provider
Post Offices have been the cheapest provider consistently since 2013 and now stand at 5.06%
The cost of sending money through MTOshas decreased from over 8% in 2008 to 6.63% in Q4 2014
MTOs are the most transparent providers: 99% transparent services (75% for banks, 53% for Post Offices)
Post Offices offer the cheapest services…
…but struggle to provide all information to customers
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World Bank –CPSS General Principles for International Remittance
Services
GP1. The market for remittances should be transparent and have adequate consumer
protection
GP2. Improvements to payment system
infrastructure that have the potential to
increase the efficiency of remittance services should be encouraged
GP3. Remittance services should be
supported by a sound, predictable, non-
discriminatory and proportionate legal and regulatory framework
GP4. Competitive market conditions,
including appropriate access to domestic
payments infrastructures, should
be fostered in the remittance service
industry
GP5. Remittance services should be
supported by appropriate
governance and risk management practices
Role of Remittance Service Providers
• Participate actively in GPs implementation
Role of Public Authorities
• Evaluate actions to achieve public policy objectives through GPs implementation
Brazil: Allowing
Business
Correspondents to
pay out remittances
Malaysia: the
professional and
sound
management of
the industry by
MSB Act and
Principal Agent
Indonesia: BI
regulation on
Consumer
Protection
Mexico: Banned
exclusivity
agreements and
increased
competition.
4.51% in
1Q2014
UAE highly
competitive
market
allowed a
reduction of
remittances
around 4%
US FinCEN’s
MSB website
to support
RSPs in
compliance
with regulation
US/Mexico:
proportionate
ID
requirements
contributes to
competition
among
regulated
RSPs
Japan Payment
Services Act
has led to
increased
competition and
cost reduction
by 3.34pp since
the reform
Rwanda Cost
reduction from
19% (2010) to
15% (2012)
after NPS
reform
US Dodd-Frank
Act to increase
transparency
and consumer
protection
Sri Lanka Cost
Reduction
from 10% to
5% after NPS
reform
GP2
PSI
EU-PSD led to
significant cost
reductions in
most European
countries in
RPW.
GP3
Leg -
Reg
GP5
Gov
Risk
Aus/NZ Cost
Reduction by
2.9pp and
2.1pp,
respectively
with Send
Money PacificGP1
T&CP
Bangladesh:
Banned
exclusivity
agreements and
increased
competition.
4.27% in
1Q2014 GP4
Comp
MKT
Role of RSP Role of Authorities
- UK: Industry Code of
conduct
- Creation of Industry
Associations: UK, US,
Malaysia, Indonesia, Jamaica,
Uganda
- Italy: Public/Private Forum
- Pakistan: Pakistan
Remittance Initiative
- Creation of interagency
coordination: US, UK,
South Africa, Japan,
Implementing the WB-CPSS General Principles
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Challenges and opportunities at the last mile
• The General Principles apply at both sending and receiving end
• Common challenges at the “last mile” include:
• Level of development of payment system infrastructure;
• Insufficient network coverage, especially in rural and remote areas;
• Restrictive regulation;
• Anti-competitive behaviors (for example, exclusivity agreements);
• Low use of cashless payment instruments;
• Low number of bank/transaction accounts.
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So, what can the Post do?
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• Provide better information to customers on both side of the transaction
• Improve customer service and handling of complaints
• Leverage existing payments infrastructure
• Value the potential of the network
• Become more competitive
• Improve governance, compliance, risk management
Directly implement General Principles
• Be allowed to offer more services by removing unfair regulatory barriers
• Be granted access to payments infrastructure
• Be leveraged for government payments and other government initiatives (also to strengthen their role and increase competition)
Benefit from implementation of General Principles
• “Universal access to financial services is within reach –
thanks to new technologies, transformative business models and
ambitious reforms”
• “As early as 2020, such instruments as e-money accounts, along
with debit cards and low-cost regular bank accounts, can
significantly increase financial access for those who are now
excluded”
Jim Yong KimPresident, World Bank Group
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THANKS!
remittanceprices.worldbank.org
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