Remittances growth · Trustly · cross-border cards · Remittance flows · News · CONTEXT · ARCHIVE

Remittances growth for the biggest players slows down

The big public remittances companies' run of ever-improving quarters following the pandemic dried up in Q3 2021, with a collection of results that have seen most growth rates slow. Market values across the sector have fallen alongside this decline.

Western Union, MoneyGram and Ria all had tougher quarters, mostly driven by weakened cash businesses as a result of the pandemic's impact in Asia and some other countries. Q2 also had the benefit of lapping the weakest quarter of the pandemic from 2020.

Intermex, the only one of the four cash remittance players not to dip into negative growth during the pandemic, had a strong 26% revenue increase, albeit from a lower base. It attributes this to an omnichannel strategy that has seen it grow its digital offering while maintaining a strong focus on retail. 

Meanwhile, Remitly, which is a new entry on our quarterly chart following its recent IPO. It is still at a far younger stage, and so is seeing rates of growth that its incumbent competitors simply can’t match. This quarter saw it achieve 69% YoY growth, although in Q1 2021 it managed 98%. 

We'll be looking closely at the Q4 numbers and will update you on them early in 2022. Meanwhile, the World Bank came out with some good overall news this week with 2021 and 2022 forecast to fare much better than originally anticipated. More on that below.

Remittances growth · Trustly · cross-border cards · Remittance flows · News · CONTEXT · ARCHIVE

Trustly’s North America open banking play

Open banking is increasingly taking off in North America, and one company to see particular growth is Sweden’s Trustly. In my latest column for Forbes, I caught up with CEO Oscar Berglund and North American President Peter Ohser to find out more.

Some of the key takeaways from my conversations with Oscar and Peter:

• The benefits of open banking are being felt by both consumers and merchants, particularly around real-time settlement and convenient authentication.
• Increasingly global reach is enabling merchants to use open banking for cross-border ecommerce, instead of being purely restricted to domestic sales.
• In North America, open banking has in particular seen a boom for Trustly over the past three years, including from major ecommerce players who are showing growing interest in the technology.
• The US differs significantly from Europe because of the regulatory environment – without PSD2 development in the US has been “much more organic”.
• Trustly is differentiating in this market by having its own connections and network, as well as an enterprise-facing proposition that includes risk management and reporting reconciliation. 
• The company’s strength in Europe also enables merchants to operate across both continents, including local currency payment collection. 

Remittances growth · Trustly · cross-border cards · Remittance flows · News · CONTEXT · ARCHIVE

The real cost of cross-border card transactions

Our global card and transactions dataset, covering 110 countries and more than 700 issuers, tracks the cost of using debit and credit cards for cross-border transactions. In addition, we track costs that issuers disclose in their T&Cs and compare these to the real all-in cost based on actual transactions. 

Approximately 45% of card programs charge a higher fee than what is reported in their issuer’s official T&Cs. Yes you read that right.

On average, the cost of transactions is 50% higher than the cost disclosed in the issuers’ T&Cs; this can mean the cost of a transaction can easily be 3-5 percentage points higher than what is stated in the T&Cs.

In an age where customers are faced with an increasing number of payment options abroad, it remains difficult for them to effectively gauge which payment options are the cheapest. This can easily lead to dissatisfied customers and large numbers of complaints, not only for the card issuer, but also for merchants accepting payments on their website as it is not always clear for customers where the additional costs come from.

These hidden costs can be due to several causes, including additional network fees; currency exchange rates that are significantly higher than mid-market rates or additional processing fees that might not be disclosed.

This problem offers an opportunity for merchants and payment processors to provide customers with different solutions. For example, merchants can provide the customer with the ability to pay in their home currency – while unlocking a significant margin opportunity. Transparency, for both merchants and card issuers, can significantly improve the overall customer experience.

In future newsletters, we will be breaking down the drivers of FX transactions’ costs and how regulations on transparency can impact these costs. Stay tuned.

Remittances growth · Trustly · cross-border cards · Remittance flows · News · CONTEXT · ARCHIVE

Global remittance flows' rebound

The World Bank has published its latest numbers on global remittance flows, and all signs point to a strong rebound from the pandemic-induced dip we saw in 2020. 

Overall, the World Bank has boosted its projections significantly from last year's numbers. 2021 now forecast at $751bn has seen a 6% increase in total flows compared to 2020 overall, with low and middle income countries seeing a 7% increase. Most importantly, 2021 is expected to end up above the pre-pandemic levels of 2019.

This is a marked improvement on the forecasts for 2021 that the World Bank published in Q4 2020, with overall total flows for 2021 being 21% higher than the 2021 forecast a year ago, and 25% higher for low and middle income countries.

The key drivers of the rebound in 2021 were an increase in support from migrants for their families back home, particularly for countries impacted by the Delta variant, as well as exceptional emergency fiscal stimuli. Easing in countries that employ large numbers of migrants also played a role, as did higher oil prices.

Latin America and the Caribbean saw a particularly strong recovery, with 21% growth in 2021, which has been attributed to labour shortages and thus increased weekly earnings in the US, the top sending county for those regions, as well as a reopening of travel and tourism.

Projections for 2022 are forecast to see a slower increase of c.3% with flows to low and middle income countries forecast to grow at 2.6%. This is in part due to the risk in a resurgence of Covid-19 cases, which have already increased in key sending countries such as the US, Japan and much of the EU.

Poor access to vaccines in economies such as Sub-Saharan Africa have also contributed to the weaker forecast, as has the ongoing microchip shortage, resulting consumer price increases and ongoing high oil prices. 2022 is also expected to see lower remittance flows in some regions such as South Asia as a result of a reduced rate of work permit issuance in Gulf Cooperation Council countries.

Remittances growth · Trustly · cross-border cards · Remittance flows · News · CONTEXT · ARCHIVE