UNCDF believes that, by leveraging data technology, remittance data can significantly improve and boost policy and product development.
Our most recent collaborations with regulatory bodies have revealed that central banks are either exploring the use of technology to enhance remittance data or are currently utilizing such techniques. Central bankers are keen to learn how other central banks and policymakers develop and adapt ways to collect, monitor, and analyse remittance data.
This growing enthusiasm comes from the realization that remittances matter, and very much so, as they represent a major and growing source of income and foreign exchange in many developing economies. The World Bank estimates that officially recorded remittance flows into low- and middle-income countries topped $597 billion in 2021 and are estimated to have increased by 4.9 percent to reach $626 billion in 2022,1 exceeding combined foreign direct investment and overseas development assistance. That said, this figure only includes officially recorded remittance flows and not those sent through informal channels, likely underestimating the total by a considerable margin. Data from the World Bank shows that there are 29 countries where formal personal remittances account for more than 10 percent of the country’s Gross Domestic Product (GDP).
Collecting and generating insights from regular, detailed, and disaggregated remittance data is vital for economies to develop policies that support increased remittance flows and market formalization, ensure better and fairer access to remittance services, and enable risks and opportunities to be identified.
Data-driven insights provide the foundation for all sorts of remittance service providers to provide quicker, more suitable, competitively priced, and easily accessible remittance products. The development of new technologies is transforming the remittance market. By producing better data, regulators can incentivize and de-risk investment while ensuring that remittance service providers benefit fully from these new technologies.
Central banks and National Statistical Offices (NSOs) play a crucial role in collecting and producing detailed remittance data on financial stability, supervision, and on addressing Anti Money Laundering and Countering the Financing of Terrorism (AML/CFT) issues. Furthermore, they support the formulation of broader financial and economic policies and help the private sector deliver the best products. Sex-disaggregated remittance transaction data are especially important as they reflect the distinct needs of women and men, their aspirations and interests, and their access to and control over remittance resources and services. Yet, despite their importance worldwide, few countries are able to collect and analyse the transaction data on international remittances needed to draft fully informed policies or optimize private sector investment and product development.
Consequently, UNCDF has been developing a benchmarking tool to help countries find, compare and share the means and systems for measuring and analysing remittance flows that could help them develop better policies. The benchmarking tool is based on high technical desk research and ongoing consultations with more than 70 stakeholders worldwide, including central banks, NSOs, technology providers, and field practitioners. The primary goals are as follows:
- Find: Identifying systems that central banks use globally to provide high-quality remittance data
- Compare: Offering a comparative analysis of the systems in place to monitor and analyse remittances
- Share: Disseminating the information across relevant stakeholders
Furthermore, the tool addresses the four big questions of who, what, why, and how, included in the UNCDF National Remittance Data Collection Assessment Tool. Specifically, the tool aims to understand:
- Who are the stakeholders responsible for collecting, analysing, and publishing remittance data?
- What remittance data do they collect?
- Why did they collect this remittance data? (Key policy use case)
- How are remittance data collected, analysed, and used?
The UNCDF Remittance Reporting and Analysis Systems (RRAS) Benchmarking Tool compares countries’ access to detailed, timely, disaggregated data, legal mandate to collect data from providers on all cross-border transfers, data collection and management systems, cleaning and validation tools, external support and suppliers, and ability to generate insights from existing data using data analysis and visualization tools.
This tool is designed to be used by a range of stakeholders. For instance, this tool enables policymakers to check their current remittance data collection status and explore further initiatives and methodologies for collecting it to increase its value. Equally, this tool could enable policymakers to identify countries with similar markets, data needs, and use cases to support peer learning. This tool could also benefit remittance service providers by providing an overview of reporting requirements in different markets and information on central banks’ readiness to share market insights to stimulate investment in remittance services.
International organizations supporting remittance data collection and analysis systems may also find this to be a helpful tool. It could provide information on the level of need and defined use cases within countries, enabling an assessment of the need and likely political appetite to invest in transaction-level reporting and analysis systems. The tool may also provide insight into market readiness, legal or operational barriers, and technical support required to develop transaction-level reporting and analysis systems. The tool could give international organizations intending to monitor remittance targets an overview of central banks’ capacities to collect and report reliable data on remittance flows, pricing, and demographic usage.
We believe that this tool will help national authorities to provide better remittance policies and, crucially, will help migrants to better access remittance services and make more informed financial choices.