The key to better remittances is digitization. Compared to informal channels and cash-based models, digital financial services are much less expensive to deliver and are also more convenient and safer to use. For migrants and their families, digitized remittances could be the gateway product to a full suite of other digital financial services—insurance, savings, credit, payments, and more—that could be delivered in tandem.

But remittances themselves must be digitized first. And they must be digitized end-to-end—migrants receiving wages digitally, sending remittances digitally, recipients keeping and using the funds in digital form. As soon as cash reenters the value chain, expense and inefficiency increase—and the opportunity to layer on additional services disappears. End-to-end digitization is not easy. And it requires an end-to-end approach. It requires the right, gender-responsive and migrant-centric infrastructure, regulations, and cross-border policy cooperation. It requires thoughtful and gender-smart product design and delivery. It requires that users, regardless of gender, have access, that they have digital and financial literacy, and that they possess the autonomy and freedom to choose how, to whom, and for what purpose they remit.

As UNCDF sees it, the promise of end-to-end digitization of remittances comes down to accessusage, and resilience.


Success means

Digital remittance solutions are available to both men and women migrants.

The challenges

A migrant’s decision about how to send money is influenced by many factors. Along with the sheer force of habit, and a general sense of distrust in financial institutions, these factors begin with the choices available in the host country and country of origin (and the migrant’s awareness of and agency to act upon those choices). They also include the ease or difficulty of doing business with formal institutions, including cost, speed, convenience, ID requirements, and government regulations or other paperwork burdens. Women migrants may experience additional challenges and risks to accessing remittances. Such challenges may include difficulty obtaining official proof of identify, limited digital literacy, or mobility constraints (to go to a money transfer outlet or other service provider) due to adverse gender norms that limit women’s freedom of movement. All these factors tend to reinforce the use of cash and thus limit opportunities to reduce transaction costs and safeguard financial integrity.

Our response

We’re investing in efforts to improve the accessibility, user experience, providers, and delivery of remittances through a digital ecosystem of financial services that builds migrants’ digital and financial literacy towards long-term behavior change. These efforts all include an integrated gender lens and are in coordination with technical assistance to national governments, regional economic communities, and multinational stakeholders to review and advise on the remittance policy and regulatory frameworks.

Success means
Migrants trust digital remittances and choose because they see value.
The challenges
Access to digital remittance channels does not automatically guarantee usage. Even with increasing availability of digital platforms for remittances, the value proposition, for a migrant, of shifting from cash-based remittances remains weak because cash enters the equation at some point anyway. Either the migrant receives wages in cash, or the loved ones receiving the remittances need those funds as cash, or both. Without end-to-end digitization across the entire remittances value chain, the long-term incentives for any single link in that chain to digitize are substantially diminished and the full benefits of financial inclusion for migrants remains unrealized.
Our response
We are working with financial service providers to put migrants at the center of the design and roll-out of remittance services. Through a collaborative, iterative approach with the providers, we are putting the voices of migrants and their families into the entire remittance delivery process from origination to termination. We are bringing our best practices, tools, and resources to the table to ensure outreach to migrants with solutions that reduce dependence on cash and deliver end-to-end digital products whose value to migrants is compelling. The goal is to make successful roll-out, ongoing engagement, and informed usage of those products a reality.
Success means
Migrants’ financial health and ability to withstand setbacks are strengthened
The challenges
For migrants and/or their families, limited access and usage of digital remittance channels is not enough. Remittances are a near-universal feature in the migrant experience, and the digital infrastructure and last-mile delivery channels that have been built up around remittances remain an under-tapped resource. New thinking and approaches are needed to expand access to value-added services, financial and otherwise, that can reduce migrants’ vulnerabilities during times of crisis and beyond.
Our response
We’re working with financial service providers so they can design and scale products that keep the physical and financial lives of migrants and families, rather than distribution structure and costs, at the center. This migrant-centric focus will increase the uptake of remittance-linked digital financial services including insurance, pensions, and credit for access to education, energy, health, water, and livelihood purposes. This will increase customer retention for providers and will support the financial health and resilience of families.

We see remittances’ potential—for individuals, families, communities, and nations—as truly transformational. So it is even more important that that our approach to this work be grounded in rigorous data and research. Many organizations are doing excellent data-gathering around remittance flows and migration in low- and middle-income countries. But gaps remain, hindering product innovation and policymaking. For example, official data may underreport the informal and unregulated flows of remittances for most developing nations. In addition, data on migration and remittance flows are gathered just once a year, and are not always broken out by geographical categories (urban vs rural, for example) or demographic ones such as sex and age. If your approach to the work rests, as ours does, on deep understanding of migrants’ lives and needs, the data will need that granularity.

As the lead United Nations agency mobilizing finance for least-developed countries, UNCDF is working to strengthen the global evidence base on international remittances by improving and investing in the collection, analysis and dissemination of accurate, reliable and comparable data and research on remittances, disaggregated by sex, age, and other characteristics. Keeping migrants at the center of our programming efforts, our data and research efforts contribute to the learning agenda in producing actionable research and publications to support evidence-based policymaking and migrant-centered product innovation.

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