Key takeaways
- RESULTS: As of September 2022, BRAC Bank reached 328,000 migrants and their family members in Bangladesh, and the percentage of women customers using digital channels increased from 37 to 45 percent.
- ACCESS: Lack of digital and financial literacy leading to discomfort in using financial services greatly inhibits access to digital remittances, especially for the last-mile groups. In the last 12 months, BRAC Bank provided digital financial training and other support services to 32 percent of customers who have participated in at least one of these training sessions. Among women, the most popular forms of support were related to opening and using a bank account, while for men, the most common training topics were getting started with and using an e-wallet.
- USAGE: Nearly all of the surveyed remittance recipients used their remittance income to cover basic household expenses or consumer products. Other than that, many also used it to pay for their children’s education, property or other assets, medical bills, debt repayment, or utility and energy payments. Most respondents had three or more distinct use cases. Compared to men, women are more likely to spend the remittance on their children’s education and paying for utility and energy bills.
- RESILIENCE: Digital channels of remittance receipts facilitate the uptake of other formal financial services, such as savings, credit, loans, insurance and mobile wallets. While 98 percent of bank account and 77 percent of bKash mobile wallet customers had used other financial services, only 70 percent of cash customers followed suit. This pattern remains the same regardless of customer social economic profiles such as education and income level.
- FINANCIAL HEALTH: Recipients using digital channels showed better markers of financial health than those who received their remittances in cash, though this could also be explained by the differences in customer profiles in different channels. For instance, more customers in digital channels, both men and women, had money left over at the end of the month, anticipated being able to have an emergency fund, and were not worried about their monthly expenditures. Similar insights were revealed through UNCDF insight series in Nepal, Senegal, and Ethiopia.
Introduction
UNCDF’s first article on research insights from its collaboration with BRAC Bank drew on an analysis of 4.2 million remittance transaction records over the last 5 years and highlighted the significant scale-up of digital remittances in Bangladesh following the COVID-19 pandemic. This transition to digital channels led to more frequent, low-value remittance transactions, offered opportunities to boost the financial inclusion of women and rural populations, and expanded the suite of available financial services.
This second article links the transaction data with the results from 507 phone surveys and 36 qualitative interviews with BRAC Bank remittance recipients to outline customer profiles and archetypes, identify barriers to access, explore remittance use, and assess the extent to which digital channels may improve the financial resilience of migrants and their families.[1] BRAC Bank is using the information underlying both articles to develop more gender- and migrant-smart products.
Access to digital remittances
As revealed in the first article, the share of BRAC Bank remittance transactions that were received digitally—via bank accounts and mobile wallets—increased from 37 to 75 percent from 2019 to 2020 and remained high in 2022. Combining the transaction data with new insights from the customer surveys offers a deeper dive into the customer profiles underlying this uptake.
While women comprise 60 percent of cash customers, they make up only 35 percent of bank account and 41 percent of mobile wallet users. Young people have adopted mobile wallets much faster than other demographics; youth aged between 18-24 years make up 28 percent of bKash customers but only 7 percent of cash and 9 percent of bank account users. Interestingly, low-income people generally use either mobile wallets or cash but not bank accounts. The country from which remittances are sent makes a significant difference in the receipt method. Beyond the payment and financial market infrastructure at the sending side, the difference of customer behaviour may also reflect the decision-making process and financial literacy level of the migrants in sending countries. The Singapore and Korea corridors are largely digital, the United Kingdom corridor is bank-led and the Saudi Arabia, Qatar and the United Arab Emirates corridors are mainly cash-based.
The customer surveys and interviews found that digital and financial illiteracy leading to discomfort in using financial services are critical access barriers that prevent last-mile groups from adopting digital channels to receive their remittances. They also found that building customers’ skills, experience and confidence using digital channels and gaining their trust were essential to promoting uptake.
Overall, only one in three cash users had experience with any form of digital remittances. Mobile wallet customers feel most confident using their phones for financial transactions. As shown below, cash users felt significantly less confident about using their phones for financial transactions than mobile wallet and even bank account users, who do so regularly. In addition, women in general are less confident in all three channels compared to men.
To improve financial literacy, BRAC Bank offers training and support to help customers get started with and use their services. In the last 12 months, 32 percent of customers participated in at least one of these training sessions. Among women, the most popular forms of support were related to opening and using a bank account, while for men, the most common training topics were getting started with and using an e-wallet.
Still, while nearly half of cash users had a mobile wallet and 30 percent said that they preferred receiving their remittances in a bank account or mobile wallet, they do not do so. This suggests that something is missing in the process of transitioning cash users to digital remittance channels and may represent an opportunity for improved customer sensitization.
Usage of digital remittances and payments
Remittances are spent on a wide variety of use cases. Four out of five customers reported using their remittances for two or more purposes. Interestingly, mobile wallet users had an average of five use cases compared to cash and bank account users, who had an average of three.
Most customers used their remittances to cover regular household expenses. Other common uses included productive investments such as starting and improving business, children’s education, health expenses, utility and energy bill payments, and financial services such as savings and credit. As such, digital remittances contribute to several Sustainable Development Goals including access to health (SDG 3), education (SDG 4), through utility bill payments, access to water and sanitation (SDG 6) and energy (SDG 7), and financial inclusion and inclusive growth (SDG 8).
More women than men used their remittances to fund their children’s education and pay medical bills and utilities. Comparatively, more men than women used their remittance income for productive investments, such as starting or improving a business or buying land, housing or livestock.
For example, during the qualitative interviews, Salma, the cash user, finds joy and fulfilment in taking care of her family and relies on the remittances that Yousuf sends to pay for daily expenses, her children’s school fees and medical bills. She tries not to spend everything and sets some money aside for emergencies. However, Salma does not feel knowledgeable about other financial services, and she does not have a bank account where her savings would be much safer. “I hide the cash in my house, but I do not hide so much as that would be risky and could attract burglars. I just hide a little for shopping and medical emergencies”, she explains. There are many stories like Salma’s. Around 15 percent of the women remittance recipients in Bangladesh save in informal channels,[2] suggesting that there is a market opportunity for remittance-linked savings products.
Rajib, the mobile wallet user, feels responsible for the financial stability of his whole family. To ensure they are taken care of, both now and in the future, he invests his income and a portion of the remittances from Rakesh in purchasing property, which provides rental income to cover current expenses and generates longer-term wealth. Rajib explores loans, savings, insurance and other financial products online and with his friends. “I use and know a lot of different financial services. I want to make the best choice for my family in each situation”, he shares.
Customers who received their remittances digitally were much more likely to adopt other digital financial services. Overall, as many as 98 percent of bank account users and 77 percent of mobile wallet users used at least one other digital financial service compared to only 70 percent of cash users.
Financial resilience
Drawing on UNCDF’s framework for financial health,[3] the customer survey and qualitativeinterviews asked questions related to remittance recipients’ financial security, financial resilience, financial control and financial freedom, and explored the relationship between digital remittance and financial health for both men and women.
The research found that digital remittance recipients were more financially secure, being better able to manage their financial commitments on a day-to-day basis, than their cash counterparts. Overall, 63 percent of bank account and mobile wallet users reported having money left at the end of the month compared to 28 percent of cash users. This is likely because digital customers have attained higher levels of education and have a higher income level than cash users.
Digital remittance recipients were also more financially resilient, in that they felt sufficiently equipped to handle financial emergencies. More than three-quarters of bank account and mobile wallet users reported that they could come up with emergency funds in the next 30 days, compared to 38 percent of the general population in Bangladesh.[4]
Sending and receiving money over long distances can be challenging for people who are used to carrying out transactions face-to-face, as it can threaten their sense of financial control. Overall, 22 percent of BRAC Bank customers reported feeling stressed when receiving remittances, and this was even higher, at 36 percent, among bank account users. However, onboarding and familiarization with the remittance process can help improve customers’ confidence and security. After using BRAC Bank, 55 percent of bank account users and 63 percent of mobile wallet users reported lower stress around receiving their remittances.
Finally, the survey demonstrated the extent to which remittances contribute to all recipients’ financial freedom, or their ability to meet their long-term financial goals. The vast majority, including 89 percent of bank account, 84 percent of mobile wallet, and 63 percent of cash users reported that receiving remittances improved their lives.
Achievements and next steps
BRAC Bank has already begun to act on the insights from the customer surveys and interviews to help ease the onboarding process for new customers. For instance, BRAC Bank recently launched an online platform to help migrants open a bank account. It is also scoping a project that would leverage its network of agent banks to lead village-level meetings that would help transition cash users—especially women and rural customers—to digital channels. As of September 2022, BRAC Bank reached 328,000 migrants and their family members in Bangladesh and the percentage of women customers using digital channels increased from 37 to 45 percent.
To support diversified remittance use cases, such as education, health, energy and savings, BRAC Bank is piloting different remittance-linked financial services. For example, UNCDF and BRAC Bank have partnered with Innovations for Poverty Action and the University of Michigan to conduct a randomized control trial to evaluate the impact of “goal setting”, a process where senders and recipients set goals on remittance use and savings for a certain period, on the uptake and usages of digital remittances and remittance-linked savings products.[5]
References
- [1] Both the survey and interview participants were selected using a stratified approach to ensure that the sample was gender-balanced and represented both digital and cash (Over the Counter) receipts sent from the main remittance-sending countries of Malaysia, Saudi Arabia, the UK, and the United Arab Emirates.
- [2] InterMedia Financial Inclusion Insights Program, “Bangladesh: Wave 6 report FII tracker survey 2018”, Data Fiinder database. Available at http://fii-website.staging.interactive.columnfivemedia.com/data_fiinder.php.
- [3] Jaspreet Singh, Ahmed Dermish, Anne Duijnhouwer and Audrey Misquith, “Delivering financial health globally: A collection of approaches, insights and recommendations”, White Paper (UNCDF-Centre for Financial Health & MetLife Foundation, 2021).
- [4] World Bank, The Global Findex Database 2021. Available at https://www.worldbank.org/en/publication/globalfindex/Data#sec3.
- [5] Dean Yang and Alexander Fertig, “The impact of migrant remittances and financial services on savings”, Study Summary (Innovations for Poverty Action 2022). Available at https://www.poverty-action.org/study/impact-migrant-remittances-and-financial-services-savings.