Global money transfers are an incredibly big deal. McKinsey’s Global Payments Map research indicates that the volume of international monetary transfers in 2017 topped out at $1.9 trillion. It marked an 11% annual increase, and these numbers are rising fast. In fact, analysts are projecting an annual figure of $3 trillion well ahead of expectations. The impact of Fintech innovation is evident in rapidly rising transfer volumes with leading money transfer apps.
International monetary transfers constitute an ever-expanding component of commercial trade and financial activity. Within this interconnected network of operations, countries including the US, China, Switzerland, India, South Korea, Singapore, and Hong Kong dominate. Global e-commerce activity has fast-tracked the industry, and a shift towards digital payments methods is well underway.
In 2018 the $2 trillion threshold was surpassed, and, McKinsey analytical research indicates that the $3 trillion benchmark will be reached within the next 5 years (2024). Such is the explosive growth of the global payments industry, that investors are pouring funds into the development of money transfer apps to facilitate rapid cross-border transfers at a fraction of the time and cost of traditional banking channels.
Consider for a moment that payments are an increasingly important component of banking revenues. Digital commerce growth and electronic transactions have made it much easier to perform cross-border money transfers with increasing alacrity. Of all the regions with a thriving global payments sector, few compare to Asia-Pacific ($900B in 2017). Mobile money transfer apps are dominated by a handful of operators including Currencies Direct, TorFX, and World First.
These apps facilitate rapid forex transactions on Android and iPhone devices, and adoption rates are rising fast. According to Statista, digital remittances are forecast at $79,327M for 2019, with a CAGR (Compound Annual Growth Rate) of 15.9% through 2023. By that stage, analysts are expecting mobile remittances to reach $143,096M worldwide. The year-on-year growth (as of the present) is 23.6% and the number of mobile banking users has spiked by 21.1% year-on-year. The current mobile user base for digital remittances is now 7.1M.
Projections of global payments revenue indicate a figure of $2.9 trillion by 2022, comprised of $1.6 trillion in Asia-Pacific, $0.6 trillion in North America, $0.4 trillion in EMEA, and $0.3 trillion in Latin America. It is astonishing that Asia-Pacific which accounted for just $0.2 trillion in 2006, will increase its share by $1.4 trillion by 2022. North America global payments revenue will double in that same time, EMEA revenues will increase by 33%, and Latin America flows will rise by 200%.
The penetration rate of mobile remittances is growing at a steady clip. While limited to just 7.1M users in 2019, the numbers climb markedly moving forward. By 2020, that number is expected to top 8.5M users. In 2021, projections for the number of users of mobile money transfer apps will rise to 10.1M users, then 11.7M users in 2022, and 13.2M users by 2023.
These digital remittances are valuable in developing countries, but cost considerations play an integral part in adoption rates. The average transaction value per user in 2019 was listed as $11,1787.6. Apps are largely used by the 25-34 years age group at 32.3%, while the 25-44 years age group comprises 25.3% of the money transfer app market.
The top countries using mobile apps for digital remittances include the US, Switzerland, Saudi Arabia, Germany, and China. The US dominates with a total monetary transaction value of $17,888M for 2019, followed by Switzerland in a distant second with $6,771M. Saudi Arabia is close in tow with $6,379M in transfers in 2019. Rounding out the top 5 are Germany on $5,622M, and China on $3,569M.
What Type of Global Money Transfers Are Taking Place?
With trillions of dollars changing hands annually, it’s worth pointing out the types of money transfers people are making:
- Domestic transactions
- Credit card transactions
- Account-related liquidity
- Cross-border transactions
What is particularly interesting about global money transfers is the rapid growth in electronic transactions activity. This is strong with developed countries like the USA, Taiwan, Germany, Singapore, Canada, Switzerland, Japan, Denmark, the UK, France, Australia, Italy, and Spain, et al. However, emerging countries have incredible growth rates. Countries like China, India, Malaysia, Russia, Nigeria, and Morocco reported annual growth rates of 25% – 30% in 2016/17.
Such is the rapid pace of electronic transactions growth in emerging countries that China is expected to account for 70% of the market by 2022. And when it comes to electronic money transfers, one third of global volume takes place through mobile apps. This means that mobile transfer websites are doing a roaring trade. Top-rate providers like the Azimo App for EU and UK users, and the TransferWise App for Australian, UK, EU, and US users are equally popular options in the mobile money transfer market.
Thanks to everyday folks, traditional banking systems have been put on notice. People are rejecting the high fees, commissions, and hidden charges imposed upon them by entrenched banks and financial institutions, and opting for easy-to-use global options. Users are encouraged to read our reviews on the best money transfer apps to fast-track payments abroad. The APAC region is the strongest of all, followed by EMEA in a distant second, and then Latin America.
Cross-border money flows are showing bullish trends in e-commerce activity. Customer to customer remittances in 2017 were estimated at $400B– $500B with a compound annual growth rate (2017 – 2021) of approximately 5%. Customer to business transfers are equally bullish with online bill payments for taxes, travel, healthcare and tuition ($250B – $350B), real estate investments ($100B – $150B), and online e-commerce ($350B – $450B)*
*Figures provided by McKinsey GCI Cross-Border Model
Why Do People Send Money Overseas?
Person-to-person money transfers are conducted for a number of reasons. Migrant workers routinely send money back to their home countries to help family members and loved ones with the bills. As new immigrants, they have the potential to earn substantially more than they would in their home countries. The exchange rate mechanism means that the value of USD, GBP, SEK, EUR, and other high value currencies is worth substantially more than their home country currencies.
Developed economies present plenty of enticements to immigrants in terms of earning potential. When dollars and pounds and euros are converted into rands, pesos, and yuan, there is substantial buying power to be gained. This increases the standard of living for people in developing nations. World Bank figures from 2014 indicate that remittances totaled $582 billion and the majority of it came from developed economies to developing economies. One can rightfully assume that these strong trends are going to continue.
Hundreds of millions of people are international migrant workers and it is safe to say that most of them send money back to their home countries. This has a positive effect on the living standards of friends and relatives in these developing nations. The countries which routinely receive the largest percentage of remittances include the Philippines, China, and India.
Former Soviet Socialist republics also make up a large chunk of overall remittances received. The originating countries for these money transfers include the US, Switzerland, and Saudi Arabia. While most countries can receive remittances from developed economies, there are several blacklisted countries including Iran and North Korea. Banks are a little reluctant to transfer funds to countries like Myanmar, but this too is possible.
To Sum Up
Several big-name money transfer companies make up the majority of global remittances. Many folks send $200 or less annually, but this number is steadily rising, given the increasing mobility of migrant workers globally. As costs decrease, users can expect inflows/outflows to gradually rise. Contrary to popular belief, it is still the banks which are responsible for the largest volume of global money transfers.
However, many emergent companies including Transferwise, Currencies Direct, TorFX, World First and MoneyCorp are coming into their own. Consider that in 2018, the World Bank report found that individual payments a.k.a. remittances abroad totaled $689 billion, for a year-on-year increase of 10%. The US remains the #1 source of remittances, while China and Mexico are the biggest recipients.