Mastercard has released a white paper on remittances in Latin America. Remittance rates are growing faster than the global average in the region, and mobile phone and internet penetration will fuel a transition from cash to digital options, the report said.
As of 2022, one in ten people worldwide lives in a home that receives remittances worth a total of $831 billion. The average cost of sending remittances to Latin America was 5.8% of the amount sent, compared to a global average of 6.3%, and costs reaching up to 25.5% at times, usually in the poorest regions, Mastercard reported.
Competition is increasing, however, sometimes creating a race to the bottom on prices. The report also cited World Bank data that showed that at least half of remittances were transmitted by informal means.
The report identifies a number of current remittance options that together “speak to the emergence of a completely new reality in global remittances.” Latin America currently receives 43% of its remittances digitally, compared to a world average of 52%. Digital remittances are expected to be worth $20 billion by 2026.
Related: Circle and SBI Holdings partner to boost USDC circulation in Japan
MoneyGram and Stellar provide remittances using USDC (USDC), and SBI Remit does so through Ripple, it said. Ripple is also leading the way in developing promising uses for central bank digital currency, along with other, more limited, projects. MoneyGram head of fintech strategy and innovation Luther Maday is quoted in the report:
“We can move money more quickly with new channels like USDC, which ultimately translates into additional liquidity for our day-to-day global operations.”
There are several other crypto players in the Latin American market, including Binance and Mastercard itself, in partnership with wallet provider Belo. Problems remain in the crypto field, however. Trust, regulatory and technological adoption issues still hinder the progress of crypto players and other providers, the report said. Moreover:
“The current digitization efforts are limited to the remittance transaction itself. In order to digitize fully and reduce costs more broadly, the digital money ecosystems in the recipient countries must be fostered.”
“It’s not enough that a recipient receives the money in an account, a card, or a wallet if they can’t make digital payments when they spend that money,” the report continued.
“The intelligent weaving of partnerships between diverse players” is needed by all remittance providers, the report concluded.
Magazine: Crypto in the Philippines: Necessity is the mother of adoption