Global remittance trends and the role

of African Postal Operators

Marco Nicolì

Payment Systems Development Group

African Conference on Remittances and Postal Networks

Cape Town, South Africa | March 4-5, 2015

Payment Systems Development Group

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A large portfolio

• 100+ countries in all Regions assisted in various projects of reform of their national payments system;

A well-established

program

• Global products: standard setting, GRWG, Remittance Prices Worldwide, Greenback, Global Surveys…

A leading team

• 40+ specialists in payment, securities settlement, and remittance systems

• 18+ years of activity in this space

Working with IFAD, UPU, WSBI, UNCDF on the

African Postal Financial Services Initiarive

Remittances continue to grow:

$438 billion to developing countries in 2014(source: Migration and Remittances Team)

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Why do we care about remittance prices?

• The cost of sending remittances is an indicator of the safety and

efficiency of the market for international remittances

• Lower costs would mean more money in the hands of migrant

workers and their families

• The availability of safe, efficient, reliable, accessible, and cost

efficient means to transfer money internationally could reduce

flows through unregulated channels

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What have we achieved in the last five years?

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In Q4 2014 the Global Average cost of sending USD 200reached 7.99%, down from 8.58% one year ago and from nearly 10% in 2008

The International Money Transfer Operator (MTO) Index reached 8.23%, down from 8.74 one year ago and from over 10% in 2008

Average cost of remittances from nearly 10 to below 8 percent

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Sub-Saharan Africa the most expensive Region,

not showing enough improvement over the last five years

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The cost of sending remittances through Banks showed a considerable decrease of from over 14% to less than 12% since 2008, but still remaining the most expensive type of provider

Post Offices have been the cheapest provider consistently since 2013 and now stand at 5.06%

The cost of sending money through MTOshas decreased from over 8% in 2008 to 6.63% in Q4 2014

MTOs are the most transparent providers: 99% transparent services (75% for banks, 53% for Post Offices)

Post Offices offer the cheapest services…

…but struggle to provide all information to customers

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World Bank –CPSS General Principles for International Remittance

Services

GP1. The market for remittances should be transparent and have adequate consumer

protection

GP2. Improvements to payment system

infrastructure that have the potential to

increase the efficiency of remittance services should be encouraged

GP3. Remittance services should be

supported by a sound, predictable, non-

discriminatory and proportionate legal and regulatory framework

GP4. Competitive market conditions,

including appropriate access to domestic

payments infrastructures, should

be fostered in the remittance service

industry

GP5. Remittance services should be

supported by appropriate

governance and risk management practices

Role of Remittance Service Providers

• Participate actively in GPs implementation

Role of Public Authorities

• Evaluate actions to achieve public policy objectives through GPs implementation

Brazil: Allowing

Business

Correspondents to

pay out remittances

Malaysia: the

professional and

sound

management of

the industry by

MSB Act and

Principal Agent

Indonesia: BI

regulation on

Consumer

Protection

Mexico: Banned

exclusivity

agreements and

increased

competition.

4.51% in

1Q2014

UAE highly

competitive

market

allowed a

reduction of

remittances

around 4%

US FinCEN’s

MSB website

to support

RSPs in

compliance

with regulation

US/Mexico:

proportionate

ID

requirements

contributes to

competition

among

regulated

RSPs

Japan Payment

Services Act

has led to

increased

competition and

cost reduction

by 3.34pp since

the reform

Rwanda Cost

reduction from

19% (2010) to

15% (2012)

after NPS

reform

US Dodd-Frank

Act to increase

transparency

and consumer

protection

Sri Lanka Cost

Reduction

from 10% to

5% after NPS

reform

GP2

PSI

EU-PSD led to

significant cost

reductions in

most European

countries in

RPW.

GP3

Leg -

Reg

GP5

Gov

Risk

Aus/NZ Cost

Reduction by

2.9pp and

2.1pp,

respectively

with Send

Money PacificGP1

T&CP

Bangladesh:

Banned

exclusivity

agreements and

increased

competition.

4.27% in

1Q2014 GP4

Comp

MKT

Role of RSP Role of Authorities

- UK: Industry Code of

conduct

- Creation of Industry

Associations: UK, US,

Malaysia, Indonesia, Jamaica,

Uganda

- Italy: Public/Private Forum

- Pakistan: Pakistan

Remittance Initiative

- Creation of interagency

coordination: US, UK,

South Africa, Japan,

Implementing the WB-CPSS General Principles

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Challenges and opportunities at the last mile

• The General Principles apply at both sending and receiving end

• Common challenges at the “last mile” include:

• Level of development of payment system infrastructure;

• Insufficient network coverage, especially in rural and remote areas;

• Restrictive regulation;

• Anti-competitive behaviors (for example, exclusivity agreements);

• Low use of cashless payment instruments;

• Low number of bank/transaction accounts.

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So, what can the Post do?

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• Provide better information to customers on both side of the transaction

• Improve customer service and handling of complaints

• Leverage existing payments infrastructure

• Value the potential of the network

• Become more competitive

• Improve governance, compliance, risk management

Directly implement General Principles

• Be allowed to offer more services by removing unfair regulatory barriers

• Be granted access to payments infrastructure

• Be leveraged for government payments and other government initiatives (also to strengthen their role and increase competition)

Benefit from implementation of General Principles

• “Universal access to financial services is within reach –

thanks to new technologies, transformative business models and

ambitious reforms”

• “As early as 2020, such instruments as e-money accounts, along

with debit cards and low-cost regular bank accounts, can

significantly increase financial access for those who are now

excluded”

Jim Yong KimPresident, World Bank Group

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THANKS!

mnicoli1@worldbank.org

remittanceprices.worldbank.org

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