By: Staff Writer
March 26, 2024
With an increasing globalized world, where digitisation has aided its rapid development, remittances have been positively affected by this growing trend, where analysts at MasterCard estimate that some $146bn in remittances were sent in 2022.
MasterCard, in a white paper released last week, said: “In Latin America, such remittances reached US$146 billion in 2022, which amounts to 25X growth over the past 30 years and more than double the amount sent a decade ago.
“Remittances are a lifeline to people in low- and middle-income nations, serving as an essential source of income for individuals, households, and countries. According to the United Nations,3 800 million people worldwide (or about 1 out 10) live in households that receive international remittances. This money can then be invested in financial and tangible assets, such as savings, or be used to develop small businesses that help families build their futures
“These realities are alive and well in Latin America. The U.S.–Mexico corridor is the single largest remittance pipeline in the world, with a 2022 volume of US$56bn. Beyond market volume, for impoverished countries, remittances can represent more than 30 percent of their national GDPs as in the case of Honduras.”
The World Bank has published its preliminary estimates for remittances for 2023 and that preliminary data projects an 8 percent growth for Latin America and the Caribbean with a value of $156 billion dollars.
Because of this growth, the push to digitize remittances is imperative to contain the high cost as well as make the flow smoother for individuals.The white paper also said: “It is imperative to digitize remittances in order to ensure the financial and digital inclusion of all migrants and their families. Beyond lowering costs, digital remittances may also improve access and boost security, key elements required to guarantee faster, safer, and cheaper remittances for citizens around the world.”
The white paper continued: “For example, while remittances overall in Latin America have grown faster than those at the global level (10 percent annually since 2014 compared to 4 percent globally), digital remittances in Latin America have grown at 23 percent annually, slightly below the global growth rate of 25 percent.
“Moreover, digital remittances in Latin America have only a 43 percent share of the total remittances market, which is nearly 10 percentage points behind the global average of 52 percent. In addition, there are important differences between countries when it comes to digital remittances. In Mexico, Central America and the Caribbean, market share for digital remittances is around 30 percent, whereas in Brazil, Colombia, and Chile, their market share is over 50 percent.”
Latin America is an evolving digitalization story. Just a few years ago, Latin America was far behind the global average in terms of financial inclusion (with 55 percent of the population owning a financial account compared to 68 percent globally in 2017) but the region experienced the fastest digital catch-up of all world regions during the pandemic years. As Mastercard’s 2023 financial inclusion study on Latin America revealed, currently 79 percent of Latin Americans have access to a financial account and/or debit card, and 88 percent of this group use a mobile phone to make payments