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Where Does the Global Remittance Industry Stand?

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The need to transfer funds across borders has risen considerably over the last few decades. Scores of businesses pay suppliers and employees from other countries and several receive payments from international customers. Migrants require the services of the remittance industry on an ongoing basis, and their numbers continue to swell. Fortunately, advancements in technology have ensured that making international fund transfers is no longer expensive, time consuming, or bothersome.

The Evolution

The global remittance industry has come long way since the ninth century, when Chinese traders used ‘flying money’ in the form of paper vouchers as proofs of payment, which served as a means to safeguard themselves from thieves. It was only when the industrial age had set in that international money transfers took a completely new form. Wire transfers entered the picture in the late 19th century, and its popularity resulted in the birth of several private non-banking companies that offered this service. Some of the pioneers of this field, such as Western Union, remain in existence even today.

While wire transfers were common in the late 19th and early 20th centuries, the use of mail remained the primary mode of communication even until the early 1990s. By this time, international money orders started finding an increasing number of takers, and they soon became one of the most commonly used way to transfer funds internationally. In the mid-1990s, money orders accounted for around 40% of remittances sent to Mexico. Low costs worked in the favor of international money orders, although the time taken for funds to reach recipients depended on multiple factors.

The biggest changes have taken place around the turn of the last century. The use of electronic transfers has increased manifold, and this medium now accounts for over 90% of all cross-border remittances. A recipient can receive cash from a physical location moments after a sender initiates a transfer. Alternatively, funds can move between bank accounts held in different countries with relatively ease, without actually dealing with a bank.

The future looks better still, where a society is embracing going cashless. With the advent of virtual crypto-currency platforms such as Bitcoin, Ethereum, and Litecoin, moving funds from one country to another may get easier than ever before.

Banks – International Telegraphic Transfers and Wire Transfers

The terms wire transfers and telegraphic transfers are often used interchangeably. However, a telegraphic transfer, historically, relies on a cable message being sent from one bank to another in order to facilitate a fund transfer.  A telegraphic transfer, or a telex transfer, usually involves a fee charged by the sending bank, and in some instances, by the receiving bank as well.

A wire transfer involves the transfer of funds electronically, and you may carry out a wire transfer through your bank. Financial institutions might depend on different transfer systems and offer multiple options when it comes to aspects such as costing and turnaround times. For example, centralized bank wire transfers in the U.S. typically rely on real time gross settlement (RTGS) systems that offer real-time and irrevocable settlements.

Banks have lost out on their share of the global remittance pie over the last couple of decades mainly because of cost-effectiveness, although the time they typically take to process transfers has also played a role. The competition they face from their non-banking counterparts, without doubt, is stiff.

Specialist Money Transfer Companies

Western Union launched its wire transfer service in 1872, by making use of its then existing telegraph network. Now, the company has storefronts in several countries, giving people easy means to send and receive money in different ways. Some of the other popular players with physical locations or agents include WorldRemit, MoneyGram, Azimo, and Ria. While the wire transfer services offered by such companies are largely similar to what you’ll find through banks, they tend to offer quicker turnaround times by charging extra fees.

The online space, owing to fewer overhead costs and rapidly evolving technology, has sprung a number of FinTech companies such as TransferWise and CurrencyFair. TransferWise, a UK-based FinTech unicorn, for instance, has successfully driven down industry costs by offering game changing services such as low-fee multi-currency accounts.

Low Tech Remittance Across Exotic Currencies Using Second Generation Mobile Phones

Residents of several countries in Asia, Africa, and South America continue using second generation mobile phones. This presents a unique opportunity not just for businesses that deal in remittance of funds, but also for mobile phone network providers. Digicel, owned by the Irish billionaire Denis O’Brien, currently operates in 31 markets across Central America, the Caribbean, and Oceania. With around 14 million customers, it is already making inroads in the mobile banking and micro insurance sectors.  O’Brien has, in the past, made clear that he hopes to leverage his mobile brand to facilitate cash transfers.

The Future – Crypto Currency Remittance

There has been a rise in the use of crypto currency as a medium for global remittance, and the upward trend is set to continue. Catherine Wood, CEO of ARK Investment Management in the US, opines that “The liquidity isn’t there, but as we gain liquidity in bitcoin, the costs will drop dramatically and be minimized. As a digital ledger, blockchain is fully transparent. There is an audit trail. We are eliminating a lot of middlemen here. FinTech will be more of an answer to the problem of fraud than a cause of it.”

However, not everybody is equally optimistic. Taavet Hinrikus, CEO of UK-based TransferWise, feels “There is a fundamental problem. It is lacking a purpose and is pure speculation. I cannot really see a problem that bitcoin is solving.” His view of the overall blockchain technology is more positive, about which he says, “I see things coming to life which are built around blockchain but not digital currencies.”

For now, it looks like depth of market may impact the ability of exchanges to convert in and out of local exchanges in different global regions. As a result, crypto currencies may not be appropriate for some of the more exotic currencies yet.

Conclusion

The developing FinTech sector will, without doubt, define the future course of the remittance industry. With consumers becoming increasingly aware of the options they have, the industry will need to keep evolving so it can provide services that match the needs of its customers. The way money is transferred across borders has witnessed a sea of change in the last two decades, and by the looks of things with new multi-currency accounts, better things are yet to come.

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Economy

Circular Economy: New rules will make EU the global front-runner in waste management and recycling

MD Staff

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EU Member States approved a set of ambitious measures to make EU waste legislation fit for the future, as part of the EU’s wider circular economy policy.

The new rules – based on Commission’s proposals part of the Circular Economy package presented in December 2015 – will help to prevent waste and, where this is not possible, significantly step up recycling of municipal and packaging waste. It will phase out landfilling and promote the use of economic instruments, such as Extended Producer Responsibility schemes. The new legislation strengthens the “waste hierarchy”, i.e. it requires Member States to take specific measures to prioritize prevention, re-use and recycling above landfilling and incineration, thus making the circular economy a reality.

Commissioner for Environment, Maritime Affairs and Fisheries, Karmenu Vella said: “The final approval of new EU waste rules by the Council marks an important moment for the circular economy in Europe. The new recycling and landfilling targets set a credible and ambitious path for better waste management in Europe. Our main task now is to ensure that the promises enshrined in this waste package are delivered on the ground. The Commission will do all it can to support Member States and make the new legislation deliver on the ground.”

The Commission had originally presented proposals for new waste rules in 2014, which were withdrawn and replaced by better designed, more circular and more ambitious proposals on December 2015 as part of the Circular Economy agenda of the Juncker Commission. These proposals were then adopted and are now part of the EU rule book.

The new rules adopted today represent the most modern waste legislation in the world, where the EU is leading by example for others to follow.

The details of the new waste rules:

Recycling targets for municipal waste

By 2025 By 2030 By 2035
55% 60% 65%

In addition, stricter rules for calculating recycling rates will help to better monitor real progress towards the circular economy.

New recycling targets for packaging waste

  By 2025 By 2030
All packaging 65% 70%
Plastic 50% 55%
Wood 25% 30%
Ferrous metals 70% 80%
Aluminium 50% 60%
Glass 70% 75%
Paper and cardboard 75% 85%

Separate collection

Building on the existing separate collection obligation for paper and cardboard, glass, metals and plastic, new separate collection rules will boost the quality of secondary raw materials and their uptake: hazardous household waste will have to be collected separately by 2022, bio-waste by 2023 and textiles by 2025.

Phasing out landfilling

Landfilling of waste makes no sense in a circular economy and can pollute water, soil and air. By 2035 the amount of municipal waste landfilled must be reduced to 10% or less of the total amount of municipal waste generated.

Incentives

The new legislation foresees more use of effective economic instruments and other measures in support of the waste hierarchy. Producers are given an important role in this transition by making them responsible for their products when they become waste. New requirements for extended producer responsibility schemes will lead to improving their performance and governance. In addition, mandatory extended producer responsibility schemes have to be established for all packaging by 2024.

Prevention

The new legislation will place a particular focus on waste prevention and introduce important objectives for food waste in the EU and halting marine litter to help achieve the UN Sustainable Development Goals in these areas.

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Strong labour relations key to reducing inequality and meeting challenges of a changing world of work

MD Staff

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Globalisation and rapid technological innovation have spurred unprecedented economic growth but not everyone has benefited. Unions and employers, together with governments, can play a major role in making growth more inclusive and helping workers and businesses face the challenges of a changing world of work. Good labour relations are a way to reduce inequalities in jobs and wages and better share prosperity, according to a new OECD-ILO report.

Building Trust in a Changing World of Work finds that trade union membership is declining in a majority of countries, while in several emerging economies large shares of the workforce are still in the informal economy. The share of employees whose job conditions and pay are regulated by collective bargaining varies greatly across sectors and countries, from less than 10% in Turkey to over 90% in Sweden. Coverage of collective bargaining have also seen a marked decline in many countries over the last decades, although in some countries more workers are covered today thanks to decisive policy reforms.

“Creating more and better jobs is key to achieving inclusive economic growth. At a time marked by increasing job insecurity, wage stagnation and new challenges from the digital revolution, constructive labour relations are more important than ever,” said OECD Secretary-General Angel Gurría, launching the report alongside Swedish Foreign Affairs Minister Margot Wallström, French Labour Minister Muriel Pénicaud, ITUC General Secretary Sharan Burrow and ILO Deputy Director-General for Field Operations & Partnerships, Moussa Oumarou.

The report is part of the Global Deal for Decent Work and Inclusive Growth, an initiative launched in 2016 by the Swedish Prime Minister Stefan Löfven and developed in cooperation with the OECD and the ILO. This multi-stakeholder partnership aims to foster social dialogue as a way of promoting better-quality jobs, fairer working conditions and helping spread the benefits of globalisation, in keeping with the Sustainable Development Goals. The Global Deal has around 90 partners representing governments, businesses, employers’ and workers’ organisations and other bodies who make voluntary commitments to contribute to a more effective dialogue and negotiated agreements on labour issues.

“We are convinced that the Global Deal for Decent Work and Inclusive Growth can  help to spur more and better social dialogue so we can provide all workers with strong voices, protection, fair working conditions and good levels of trust with employers,” Mr Gurría said.

“The new report shows that enhanced social dialogue can create opportunities for more inclusive labour markets and economic growth, better socio-economic outcomes and greater well-being for workers, improved performance for businesses and restored trust for governments,” said ILO Director-General Guy Ryder.

Some 2 billion workers around the world – more than half the global labour force – are in informal and mostly insecure jobs, according to the report, meaning they do not have formal contracts or social security. Annually there are 2.78 million work-related deaths and 374 million non-lethal work-related injuries and illnesses.

The report highlights the crucial role that unions and employers can play in shaping the future of work by jointly deciding what technologies to adopt and how, contributing to manage transitions for displaced workers, helping identify skills needs and developing education and training programs. The report also shows that when looking at the OECD Guidelines for Multinational Enterprises companies with a higher social score (a measure of their capacity to generate trust and loyalty among the workforce, customers and wider society) also have a stronger financial performance.

This report analyses the voluntary commitments made by Global Deal partners and gives examples of initiatives to improve labour relations that have been taken in different countries and sectors.

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How digital is your country? Europe needs Digital Single Market to boost its digital performance

MD Staff

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European Commission published the results of the 2018 Digital Economy and Society Index (DESI), a tool which monitors the performance of Member States in digital connectivity, digital skills online activity, the digitisation of businesses and digital public services.

According to it, the EU is getting more digital, but progress remains insufficient for Europe to catch up with global leaders and to reduce differences across Member States. This calls for a quick completion of the Digital Single Market and increased investments in digital economy and society.

Andrus Ansip, Vice-President for the Digital Single Market, said: “This is a shift, albeit small, in the right digital direction. As a whole, the EU is making progress but not yet enough. In the meantime, other countries and regions around the world are improving faster. This is why we should invest more in digital and also complete the Digital Single Market as soon as possible: to boost Europe’s digital performance, provide first-class connectivity, online public services and a thriving e-commerce sector.”

Mariya Gabriel, Commissioner for Digital Economy and Society, said: “We look forward to a rapid progress on major reforms such as the European Electronic Communications Code aiming at boosting investments in enhanced connectivity. This year’s Digital Economy and Society Index demonstrates that we must deploy further efforts to tackle lack of digital skills among our citizens. By integrating more digital technologies and equipping them with skills, we will further empower citizens, businesses and public administrations. This is the way to succeed the digital transformation of our societies.”

Over the past year, the EU continued to improve its digital performance and the gap between the most and the least digital countries slightly narrowed (from 36 points to 34 points). Denmark, Sweden, Finland and the Netherlands scored the highest ratings in DESI 2018 and are among the global leaders in digitalisation. They are followed by Luxembourg, Ireland, the UK, Belgium and Estonia. Ireland, Cyprus and Spain progressed the most (by more than 15 points) over the last four years. However, some other EU countries still have a long way to go and the EU as a whole needs to improve to be competitive on the global stage.

DESI 2018 shows:

Connectivity has improved, but is insufficient to address fast-growing needs

  • Ultrafast connectivity of at least 100 Mbps is available to 58% of households and the number of subscriptions is rapidly increasing. 15% of homes use ultrafast broadband: this is twice as high as just two years ago and five times higher than in 2013.
  • 80% of European homes are covered by fast broadband with at least 30 Megabits per second (Mbps) (76% last year) and a third (33%) of European households have a subscription (23% increase compared to last year, and 166% compared to 2013).

The number of mobile data subscriptions has increased by 57% since 2013 reach 90 subscriptions per 100 people in the EU. 4G mobile networks cover on average 91% of the EU population (84% last year).

Indicators show that the demand for fast and ultrafast broadband is rapidly increasing, and is expected to further increase in the future. The Commission proposed a reform of EU telecoms rules to meet Europeans’ growing connectivity needs and boost investments.

More and more Europeans use the internet to communicate

The highest increase in the use of internet services is related to telephone and video calls: almost half of Europeans (46%) use the internet to make calls, this is almost a 20% increase compared to last year and more than 40% increase compared to 2013. Other indicators show that 81% of Europeans now go online at least once a week (79% last year).

To increase trust in the online environment, new EU rules on data protection will enter into force on 25 May 2018.

The EU has more digital specialists than before but skills gaps remain

  • The EU improved very little in the number of Science, Technology, Engineering and Mathematics (STEM) graduates (19.1 graduates per 1000 people aged 20 to 29 years old in 2015, compared to 18.4. in 2013);
  • 43% of Europeans still do not have basic digital skills (44% last year).

Alongside the Digital Skills and Jobs Coalition, the Commission has launched the Digital Opportunity Traineeships to tackle the digital skills gap in Europe. The pilot initiative will provide digital traineeships for up to 6,000 students and recent graduates until 2020 in another EU country.

Businesses are more digital, e-commerce is growing slowly

While more and more companies send electronic invoices (18% compared to 10% in 2013) or use social media to engage with customers and partners (21% compared to 15% in 2013), the number of SMEs selling online has been stagnating over the past years (17%).

In order to boost e-commerce in the EU, the Commission has put forward a series of measures from more transparent parcel delivery prices to simpler VAT and digital contract rules. As of 3 December 2018, consumers and companies will be able to find the best deals online across the EU without being discriminated based on their nationality or residence.

Europeans use more public services online

58% of internet users submitting forms to their public administration used the online channel (52% in 2013).

  • 18% of people use online health services.

In April 2018, the Commission adopted initiatives on the re-use of public sector information and on eHealth that will significantly improve cross-border online public services in the EU.

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