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 access, usage, and resilience.
Digital remittance solutions are available to both men and women migrants.
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.
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.
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.