Mobile money has ‘equaliser’ role in emerging economies

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  • Mobile-based payments and international money transfers now a part of the daily life of many people living in emerging economies
  • Overseas transfer rates are expensive in many parts of the world, based on recent data
  • Remittances can help poorer sectors get out of poverty, the United Nations says

An opportunity assessment for 2017 to 2027 found that mobile money transfers have an equalising effect in emerging economies as more people in said regions now have access to financial services.

According to a Market Research Reports survey, smartphone use in low income nations increased in recent years. The same survey says that this increase later resulted to more mobile wallet users in said economies.Analysts say that the findings are not surprising since mobile payments and transfer apps are innovative, secure, and provide convenience that brick and mortar banks can’t. Apart from peer-to-peer transactions, mobile apps are also making it easier for local businesses to receive payments for sales. For emerging economies that rely on remittances, apps that allow labour migrants to transfer money internationally have become a lifeline if not a part of daily life.

According to TransferGo, a remittance fintech, “access to  bank accounts and payment cards is second nature to the Western world, but things are very different in other parts of the world.” In an article published by the company, the fintech also gave African countries as an example as they “primarily deal with cash payments.” It is noted that this is happening in the Middle East and Asia as well. To put the comment into perspective, there are 140 developing nations out of the 195 or 196 nations in the world which means that most of the world do not have access to financial services or said access is limited. Access to financial services is just the tip of the iceberg though because African and Asian nations also have to contend with expensive money transfer rates. In fact, a BBC report notes that traditional remittance companies charge around 7% to labour migrants.

The United Nations noted in 2017 that remittances sent through mobile apps and other channels are fueling businesses around the world. Aside from contributing to economic growth, remittances are also used to pay for basic needs such as shelter, food, utilities, and education. The impact of money transfers is undeniable, according to TransferGo executives because they do not only pay for necessities or trickle down the economy, they also “influence investments in a variety of ways.”

Three years before the Market Research Reports assessment, the European parliament said that remittances are also a source of revenue for local governments since recipients still pay taxes for transfers and their loved ones abroad do the same. In fact, in countries like the Philippines where Overseas Filipino Workers send around $33 billion per year, remittances play a crucial role the economy’s growth. Labour migrants can effectively control inflow if they choose to.

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Andrea Barnes
Editor
Andrea is Communications Manager at FXcompared. Prior to joining FXcompared, she worked as a communications consultant for companies seeking guidance with their social media, marketing and digital… Read more

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