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Return to sender: Making remittances cheaper and safer

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School fees, medical expenses, weddings, a new refrigerator – there are countless reasons why millions of migrants send money back home to their families. For many families in developing countries, remittances from overseas are a reliable and steady source of income that help them meet the basic needs of daily living. According to 2017 World Bank estimates, remittances to developing countries reached a record high of $466 billion – more than the total of official development assistance provided globally.

However, sending money across borders is not cheap. The global average cost of sending a remittance is 7 percent of the total amount sent. This is still far off from the U.N.’s sustainable development goals to reduce, by 2030, the average cost to 3 percent and the maximum cost to 5 percent.

But why are remittances so expensive?

There are several reasons, including: underdeveloped financial infrastructure, limited competition, regulatory obstacles and lack of access to the banking sector. Often, remittance fees are not transparent or properly reported.

The global community is now looking to emerging financial technologies or “fintechs” – such as distributed ledger technology – to help reduce the cost of sending remittances, while still meeting customer due diligence requirements. Although in their infancy, these technologies have the potential to significantly reshape the global economy.

Innovative fintech startups are also using online and mobile platforms to replace the traditional middlemen – bank........

© Japan Today