Remittance system must evolve to match growing workforce

Payments home by overseas workers reached a staggering $534 billion (£358.7 billion) last year and look set to top $685 billion (£460.1 billion) by 2015, according to the World Bank. With such a vast amount of payments today being conducted across borders, there is a real need for more efficient ways to make payments.

In Western Europe, despite a brief decline in workers’ remittance payments during the financial crisis and a general reduction in immigration levels, these payments have now stabilised and started increasing again over the last few years. Indeed, factoring in informal flows that are not tracked, the scale of the growth is greater still.

There is increased mobility of the global population, as more and more people move abroad to earn their keep and remittance payments have risen in conjunction with that. This has created a growing demand for payments sent to families back home to be secure, quick and simple.

If a high level of global financial inclusion is to be achieved, remittance solutions will continue to be critical.

A changing workforce

The UK is a major player in the remittance market. World Bank figures say there are 7 million immigrants living in the UK - about 11 per cent of the population - and the UK is the fourth largest sender of remittances in the world.

An estimated $23.16 billion was sent from the UK in remittance money in 2011; but of this, only $3.2 billion was made up of officially recorded payments.

Such a high volume of unregulated payments occurring across the globe raises worrying questions about current payment systems. New methods need to be explored that will carry out these payments better, and ensure they are monitored them to and underhand transactions curtailed

Sending money abroad via a money transfer bureau incurs significant fees; in addition, if the currency requires conversion, FX rates and mark-ups mean even higher costs.

Transforming the remittance market

Solutions such as prepaid cards provide an easy and safe way to transfer sums of money abroad in instantaneous international payments. Faster, more secure and with better exchange rates than most available wire transfer options, prepaid cards are an increasingly popular option.

Prepaid options also help to level the playing field for traditional and new entrants to the lucrative remittance market, by opening up a new revenue stream for merchants who are not specialist remittance providers.  Features like the ability to make “micro-remittances” – small, repeated payments – allow consumers to save funds while making a profit for merchants, and compare favourably with the costs involved with traditional transfer services and large infrastructure.

By offering services that allow foreign nationals working in the UK to remit currency at low cost, Prepaid Financial Services is helping to the remittance market to grow and innovate. Prepaid cards are typically much cheaper than other methods, operating at anywhere between 0 to 6 per cent above MasterCard interchange rates.

Prepaid users can be saved from the inconvenience of traditional remittance services by having separate cards in each location with separate balances, or multiple cards with a joint shared balance for P2P payments. Any money topped up on to the card in one location can then instantly be accessed by the other user in a different location anywhere around the globe, saving a vast amount of time and effort; especially so for those who don’t have easy access to a bank.

Prepaid technology is rising in tandem with remittance transfers, and is becoming increasingly respected within the remittance market as a tool to provide the un-banked and the underserved with broader access to payment solutions.  The transient, migratory and under-banked nature of today’s workforce suggests that prepaid cards are an ideal solution for consumers, businesses and their global workforce.

The challenge for businesses within the money transfer, FX and remittances sector is to adopt, adapt, innovate and step on board the prepaid revolution or risk getting left behind.