Kaushik Ghosh

Vice President - Client
Management, APAC

Blog | 3 min read

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Increasing globalisation has expanded huge economic opportunities for people residing in South Asia. Many economies here are driven by remittances which also form a sizable portion of their GDPs. People working in different parts of the world send money back to their families residing here. And thus, the importance of seamless, transparent, and secure cross-border transactions is even more significant in the context of driving financial inclusion in developing countries. Moreover, the rise in global trade partnerships and expansion of opportunities in e-commerce have further elevated the need for digital financial services which are accessible, available, and affordable and drive the larger agenda of empowering people with financial inclusion.

Globally, over 200 million migrant workers, working in 40 countries across the globe, transfer money back home to their families in 125 countries. Here, it is noteworthy that Asia accounts for around 35% of global payment flows. According to Mckinsey’s Global Payments Map, the region accounted for over 40% of more than $200 billion of global cross-border payments revenues in 2021. The South Asian region is home to many developing countries and remittance is a lifeline for a majority of these growing economies. The money received is spent by family members on essential items like food, health, education, etc. in rural and remote areas which are still underbanked or financially excluded.

The importance of remittances as a driver of financial empowerment has been recognized globally, however, challenges still remain. The high cost of sending money, informal flow structures, strict regulatory measures and processes, and the requirement of multiple documents make small-value transactions for migrant workers highly unattractive and cumbersome. According to the World Bank, the importance of the reductions in the cost of cross-border payments cannot be understated as for every 1% drop in remittance prices, around $6.89 billion becomes available annually to migrant workers.

It is encouraging that global actions are being steered to bring the transaction costs down which include aims such as boosting competition in payments, global price targets for retail payments of 1% of transaction value and no corridor costs to exceed 3% by 2027 and others. Making the entire process seamless with the help of digitalisation and technology can not only bring the costs down but also offer a better user experience. Thus, it is imperative to eliminate the existing bottlenecks, bridge gaps and remove inefficiencies in cross-border payments to ensure a smooth flow for better financial inclusion.

Digitalisation of domestic payment delivery systems, compliance screening, regulatory reporting, data storage, and communication can result in greater convenience, speed, and security in transactions, deepening financial inclusion in South Asia. Integrating new technologies such as blockchain in the financial ecosystem and innovative solutions like Central Bank Digital Currencies (CBDCs) can bring down the costs of cross-border payments and speed up last-mile fund distribution.

Deeper internet penetration, higher smartphone adoption and technological advancements have contributed a lot to better financial inclusion in the South Asian region. And now, faster, more affordable and accessible cross-border payments backed by reliable technology can expand the benefits of fintech to migrant workers and their families, support economic growth, facilitate global trade and development, and lead to financial inclusion and empowerment.