Mobile Remittances and their role in fuelling financial inclusion
In our previous post on Mobile Money we talked about how it has been transforming the payments landscape. Now we explore the potential of Mobile Remittances and its impact on financial inclusion.
Mobile money’s rapid expansion is already bringing new opportunities to the 1 in 7 people worldwide that send or receive international remittances. In 2016, the GSMA also reported that the number of registered mobile money accounts worldwide had surpassed 556 million, demonstrating the huge potential that exists.
With around 51 active mobile money corridors, many people are already benefiting from the often reduced costs, added convenience and security that comes from using a cellphone to make transactions.
Benefits of Mobile Remittances
Currently, most online money transfer and mobile services are targeted towards those in urban areas in both remittance sending and receiving countries. But it’s the customers in rural areas that stand to benefit the most.
Greater accessibility - the long, costly or sometimes dangerous trips made by those living in secluded areas will become a thing of the past. Remittance senders do not have to commute or face wait times to complete their transfers. In some cases, many beneficiaries won’t need to visit a payout point to collect their money, as it can be delivered directly to a mobile wallet.
Financial inclusion - by connecting customers to the broader domestic payments eco-system, mobile remittances are already contributing to building more financially inclusive societies. In some countries, like Tanzania and El Salvador, mobile money services are also being used to make domestic payments for essentials such as milk and utilities. There has also been a move to transfer salaries via this method in Qatar.
Increased savings - the ability to safely store remittances in a mobile wallet for savings is another good example of financial inclusion. The ability to save money on a mobile phone and cash-out only when needed promotes individual savings, reduces the risks of theft, and leads the way for less cash-dependent societies.
While the case for mobile remittances is strong, according to IFAD more can be done to address some of the security, regulatory and legislative challenges that exist for international mobile remittances to be more widely accepted.
Some countries are already leading the way in terms of adopting new technologies although many customers may still be wary of any method that places their money in the ‘hands’ of an electronic device.
The transition period from cash to digital has not been as fast as many mobile money supporters may like, with many people still opting for face-to-face interaction with their trusted agent. Not to mention, that some beneficiaries still do require access to cash in countries where the infrastructure has not been set-up to allow the use of payments for basic goods or an easy cash-out option.
The M-Pesa example
M-Pesa was launched in 2007 by the largest mobile network operators in Kenya and Tanzania as a simple way of texting small payments between users. Last year the service processed around 6 billion transactions and celebrated its 10th anniversary in March 2017.
The system has been lauded for giving millions of people access to the formal financial system and reducing poverty, allowing customers to store and exchange money, securely in their mobile device.
With so much innovation in this fast-paced digital age, and with more companies adopting and developing mobile money technology, we can only expect its influence to spread further in the coming years as even more people in developing countries start to own smartphones.
On the mobile remittance receiving side, more focus on building infrastructures that facilitate the ease of domestic payments, combined with education and greater awareness of the benefits of mobile money, will also drive a shift in user behaviour and faster adoption in the countries and communities that stand to benefit most.
 IFAD Sending Money Home: Contributing to the SDGs, one family at a time, page 38
 The New York Times: Kenya’s Banking Revolution Lights a Fire