[PANEL SESSION] Building the infrastructure for small remittances

  • Laurie DUFAYS, WSBI
  • Antonio MOREIRA, Caixa Economica Verde, Cabo Verde

  • Tom CALLAERT, SWIFT, Belgium
  • Murat KASTAN, UPT, Turkey
  • Cat DENOON-STEVENS, Mukuru, South Africa


    Laurie DUFAYS opened the meeting, welcomed the participants and introduced the speakers. She then started with an overview of the significance of remittances. In 2020, they reached a total volume of USD 540 billion, which is higher than both FDI and official development assistance put together. Characteristics are: ‘low value - high volume’ with primary receivers in emerging markets; great variety in end-users priorities, and a large variety of service providers. The market is vulnerable for disruption because agile players largely adopt the latest technologies. Challenges include: Sub-Saharan Africa (SSA) as the most expensive area to send money to, some cross-country corridor issues, limited implementation capacity in some jurisdictions, and diverging issues regarding speed, transparency and access.

    Dufays then introduced the speakers’ organisations, starting with Caixa Economica de Cabo Verde. While doing well, the Caixa is challenged in areas of corresponding bank network restrictions, compliance requirements, bank charges, and international competition. She continued comparing some technical features (and payments offering) of Caixa with SWIFT, of SWIFT with the UPT platform, and of UPT with Mukuru.

    Antonio MOREIRA then further introduced Caixa, proud to report having been voted best bank in Cabo Verde in 2021. The country is well banked, with all banks together managing twice the number of accounts than the number of inhabitants. And the remittance line of business is also well covered by many remittance players such as Western Union usually working with and through the banks. That is also how Caixa was introduced to the remittances sector. And gladly so because of the high commissions that were initially paid out. Caixa is convinced it can stand increased competition in the market because of its strong community focus, cooperation with the post offices and continuous efforts to offer convenience and transparency. A setback is the corresponding bank system it needs to utilize which drives up costs, is less transparent and works slowly.

    Tom CALLAERT added that SWIFT together with the SWIFT community is looking at solutions to improve the experience for consumers and small businesses sending low-value cross-border payments. With the launch of SWIFT Go in July, SWIFT is already making fast, affordable and fully predictable low-value payments a reality.

    Murat KASTAN also said they follow that system closely, and with his shareholders they are always on the look out for new options and channels to improve services while keeping fees low. A method that works is to pool resources in the UPT platform. It eliminates the need to make use of several corresponding banks for a single remittance transaction. A particular hurdle still to overcome is the routine that banks and the post office system in Turkey only wish to work through their traditional corresponding network and are not eager to include smarter and more affordable options. This created common disappointment in view of covid when many transfers made from abroad took a long time to arrive and with at high costs too. Fintechs would do so much better.

    Cat DENOON-STEVENS remarked that in South Africa cash transactions are still dominant and Mukuru facilitates that demand through an instant cash service as well as an instant bank transfer and card payments so that speed remains high and costs low. Cash services partly remain popular due to lack of (good) internet connections in rural areas. So cash-to-cash remittances are still a priority service. In the meantime incentives are offered to gradually move clients into digital delivery models but even though the infrastructure is basically ready, there remain last mile challenges.

    Moreira subsequently pointed to inconsistencies and recurring obstacles. The example is to send EUR 200 from Country A to B. Instant delivery by Western Union would cost EUR 15, whereas internet transactions would only cost EUR 6 but would not be as smooth. Due to new regulation, however, Western Union is not necessarily equally swift as before. Finalization of a transaction can be delayed due to such issues. So compliance is a serious issue as it may delay all kinds of transfer channels. In Cabo Verde not so much the small transactions for daily expenses are subject to more rigorous screening, but the slightly larger sums intended for small investments. Really large sums are not allowed to be transferred through Western Union and others.

    With respect to current market evolvement, Callaert argued that any friction needs to be attended to in order to increase speed and reduce the total cost of a transaction. This is also taken up by central banks and their bodies. More streamlining and convergence can be expected to come into the system as demand for transfer capacity keeps growing. Kastan in that respect mentioned that especially telephonic transactions may get a lot of traction as this bypasses several steps in the process. Coordination needs to be intensified and adjusted to the overall need for global inclusion. Markets need to adjust to customers rather than the other way around.