| Top Global Remittance Trends for 2023

Top Global Remittance Trends for 2023

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The global remittance industry observed significant growth in 2022. 

Thanks to the proliferation of digital technology, remittances expanded in both volume and value across almost every corner of the world

Such success has left many industry stakeholders with one overarching question: will these trends continue through 2023?

While the future remains uncertain, the recent past shows global remittances consistently overcoming obstacles and outpacing expectations. 

Indeed, remittances have thrived through the pandemic, rising inflation, unprecedented supply chain issues, and ongoing global conflict. 

While forecasts remain optimistic for global remittances in 2023, it’s important to examine individual regions and assess their challenges and opportunities. 

In this article, we’ll provide an overview of the remittance industry in 2022, a snapshot of global remittance trends in the coming year, and an analysis of the major regions driving remittances into the future. 

A Brief Overview of the Global Remittance Industry 2022

Remittances to low-and-middle-income countries (LMICs) reached $626 billion in 2022—a 5% annual growth.

These astonishing numbers spotlight an unavoidable truth: global remittances are officially more valuable than foreign direct investment (FDI). 

In other words, global remittances—the money sent by individuals—have eclipsed much of the FDI assistance sent by the world’s wealthiest nations.  

According to Dilip Ratha, lead economist in Macroeconomics and Fiscal Management at the World Bank, this growth cycle is only just beginning:

“In five years, remittances will likely becomelarger than development assistance and FDI combined,” Ratha says. “The underlying factors driving remittances will continue to grow. We could see remittances reach a trillion dollars in the foreseeable future.”

Remittances are a true lifeline of economic opportunity for individuals, families, and communities around the international community. 

Though many factors have fueled this trend, one component has indelibly changed the remittance landscape: unprecedented access to affordable and secure digital technology

In other words, remittances closely follow the expansion of smartphones.

It’s clear that the pandemic only further increased our reliance on mobile technology. It inspired a chain reaction that created numerous opportunities for stratospheric growth within the remittances industry. 

According to Forbes Magazine, 2020 was “the biggest catalyst for growth of digital remittances ever. Four years of digital growth was compressed into two months in the money transfer space.”

Better yet, countries languishing in banking deserts were suddenly receiving the vital access they always needed

India, for example, had a meager smartphone penetration of just 22% in 2017. By 2021, however, over 60% of the country was using iPhones, Androids, and other smartphones.

While there is undoubtedly much more work to be done, countless consumers have access to faster (and safer) ways to send money around the world.

Challenges for Remittances in 2023

While remittances have withstood many global challenges, they have yet to claim victory over one persistent issue: exorbitant costs and fees

This is a well-documented struggle that must be overcome in the immediate future. 

In their widely-published Sustainable Development Goals (SDGs), the United Nations specified an ideal average cost of 3% for remittance transfers. While remittance fees have dropped precipitously in recent years, they still average close to 6%

As long as remittance fees remain high, individuals and communities will be denied the funds they need to thrive. Worse yet, high remittance fees force users to rely on informal channels and risk losing their funds altogether. 

Part of the struggle to reduce remittance fees lies at the feet of Anti-Money Laundering/Combating the Financing of Terrorism regulations.

Though these checkpoints are no doubt important, they often restrict user access to new service providers and incidentally drive up the cost of each remittance.  

Finally, in addition to cost and regulations, the international remittance industry will likely face a range of economic threats in 2023, including rampant inflation, rising energy and food bills, and the looming threat of a global recession. 

Alongside these economic concerns, various migration trends could further change the remittance landscape, including climate change migration, which could force the relocation of over 216 million people by 2050

Regional Expectations in 2023

While it’s too early to project how the entire remittance market will fare in 2023, individual regions can help us distinguish the signal from the noise. 

East Asia and Pacific (Slight Decline in 2023)

After increasing by 0.7% in 2022, remittances are projected to decline by approximately 1% in the East Asia and Pacific region. According to the World Bank, this downward trend is largely due to unstable conditions in migrants’ destination countries.

Unfortunately, it also appears that the per-transaction cost of remittances is on the rise. In fact, the average cost of sending $200 to countries in East Asia and the Pacific jumped to 6.2% in the second quarter of 2022—up from 5.8% a year earlier.

Europe and Central Asia (Moderate Growth in 2023)

In the weeks following the Ukraine-Russia conflict, remittances to Europe and Central Asia skyrocketed 10.3% in 2022, totaling $72 billion last year. While remittances are expected to soften in 2023, experts still anticipate an additional 4.2% growth by the end of this year. The cost of sending $200 to Europe and Central Asia averaged roughly 6.4% last year. 

Latin America and the Caribbean (Moderate Growth in 2023)

Latin America and the Caribbean saw a remarkable 9.3% rise in remittances in 2022. 

Nicaragua saw a 45% increase, Guatemala experienced a 20% rise, and Mexico reported a 15% growth. Furthermore, countries like El Salvador, Jamaica, and Haiti all reported that their 2022 remittances comprised over 20% of their gross domestic product (GDP). 

Though these positive trends will likely slow in 2023, remittances are still expected to grow an additional 4.7% across Latin America and the Caribbean.

Sending $200 to the region averaged 6% per transaction in the second quarter of 2022, up from 5.6% in 2021. 

Middle East and North Africa (Low Growth in 2023)

After a meteoric rise in remittances in 2021 (to the tune of 10.5% growth), developing countries in the Middle East and North Africa reverted to the mean in 2022 (2.5% growth). 

Nevertheless, remittances still comprised a large percentage of the GDP in two countries: Lebanon (38%) and West Bank and Gaza (19%). 

In keeping with remittance growth of 2.5% in 2022, analysts predict an additional 2% growth in 2023. 

Sending $200 to the Middle East and North Africa averaged 6.3% in fees last year. 

South Asia (Uncertain Growth in 2023)

Though South Asia remittances grew 3.5% in 2022, some countries benefited far more than others. For example, India observed a staggering 12% gain, while Nepal saw a more meager 4% increase. 

Though the exact numbers are uncertain, analysts anticipate continued growth in South Asia in 2023 for one primary reason: the average cost of sending $200 to the region is just 4.1%, down from its 4.3% high in 2021. 

Unsurprisingly, South Asia is the region best positioned to fulfill the United Nations’ Sustainable Development Goals for remittance affordability. 

Sub-Saharan Africa (Moderate Growth in 2023)

After witnessing a respectable 5.2% growth in 2022, Sub-Saharan Africa is expected to see another 4% growth over the coming year. Unfortunately, the cost of sending remittances to the region remains exorbitant: 7.8% in 2022 (though down from 8.7% in 2021). 

The cost of remittances must be lowered, as Sub-Saharan Africa will be very dependent on financial support in 2023. As wages decrease and food prices increase, the region will be leaning on remittances more than ever. 

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