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Economy

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

What are Market Anticipations and Policy Expectations as Shares Tumble?

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On April 21st, the three major A-shares indices saw a severe drop due to a combination of local and global causes. The Shanghai Composite Index dropped 2.26%, the Shenzhen Component Index dropped 2.7%, the ChiNext Index dropped 2.17%, and the CSI 300 Index dropped 1.84%. More than 4,400 stocks fell in both cities, while industrial categories led by tourism, fertilizer, agriculture, and photovoltaics almost across the board.

As April started, the Shanghai Composite Index has fallen 7.5%, down 10.5% from the beginning of March. The CSI 300 Index has dropped 13.40% from 4,614 in early March to the current 3,995.83, which tumbled 21.31% from 5,078 in mid-December last year. Because incremental funds were not injected into the market anymore, only stock funds were up for grab. Since the middle of March, A-shares stock trading has been declining, indicating a lack of investor trust.

Researchers at ANBOUND believe that this demonstrates the market’s pessimism about the future economic situation. With the downward pressure on the economy increasing, market confidence restoration and expectations stabilization are critical to helping in the healthy development of the capital market, as well as important in maintaining growth and averting risks.

Figure 1: The Shenzhen Component Index plunging more than 4,200 in the past 4 months

Source: Sina Finance

Market institutions have generally accepted the several factors that have caused the recent severe falls in the stock market. First, the worldwide geopolitical risk of distorting the supply chain and affecting company earnings is rather high. Second, since the Federal Reserve has escalated monetary tightening, the quick reduction of the interest rate gap between China and the U.S., as well as the inversion of the RMB exchange rate, is driving the RMB exchange rate to alter, raising concerns about capital flows. Next, the resurgence of the domestic pandemic has a substantial negative influence on China’s economy, particularly in consumption and real estate as indicated in the first-quarter economic statistics, which has heightened concerns about the country’s macroeconomy. Finally, the pessimism has been accentuated by a substantial disparity between recent central bank macro policy actions and market policy expectations. As a result, as long as present internal and external concerns persist, the A-shares market is unlikely to improve much in the immediate term.

Figure 2: The Shanghai Composite Index shedding more than 600 in the past 4 months

Source: Sina Finance

Historically, the fluctuations and transformation of China’s stock market couldn’t fully reflect China’s overall economic situation. However, in terms of expectations, the shifting trend of the A-share market, by acting as a barometer of the economy, continues to illustrate the genuine expectations of capital market investors on future business and overall economic developments. As observed in the March market trend, changes in external variables have been absorbed, but recent stock market volatility is more likely to be aggravated by changes in internal elements. As a result, changes in China’s economic circumstances and policy expectations are undoubtedly the cause of the stock market’s dramatic volatility. Investors are increasingly concerned about the negative economic impact of the COVID-19 outbreaks, as well as a lack of trust in the stability of present economic strength and the rhythm of macroeconomic measures that sustain the economy. As things stand, despite the continued implementation of measures and policies aimed at stabilizing the capital market, these policies are insufficient to boost market confidence.

The pandemic and policy declarations are not only harming the capital market but are also major variables influencing China’s economic future. Notably, the recurrence of COVID-19 is concentrated in those economically developed regions such as the Yangtze River Delta and the Pearl River Delta. The scope and depth of its economic impact may surpass that of the outbreak in Wuhan in 2020. In such a case, we believe that there is a demand to put dedicated unconventional policies into place. In this regard, it is necessary to implement targeted measures to stabilize economic fundamentals based on strengthening prevention and control. On the other hand, it is also essential to promote systematic easing among macro policies to avoid the catastrophic consequences caused by shrinking demand.

Since the beginning of the year, in the framework of the Chinese central bank’s monetary policy implementation process, it has taken a cautious approach to progressively easing, which is far from the policy expectation. Although the central bank has maintained “reasonably ample liquidity” as a whole, the reality of the domestic economy indicates the private economy and a large number of small and medium-sized enterprises are unable to obtain sufficient credit support from those “accurate liquidity provisions”. Such economic structural difference requires not only targeted structural reforms, but also overall easing to achieve the dredging effect from “loose money” to “loose credit”, which would reverse the passive situation. Zhang Jun of Morgan Stanley Securities also pointed out that the policy-level “fueling tactics” will cause a waste of policy space and may also deepen the risk to diminish the expectations.

Concerning the present external limitations that limit China’s domestic measures, ANBOUND has previously stated that variables such as interest rate spreads produced by economic and policy disparities are only one of the external factors impacting China’s economy, but not the most important one. Further concern should now be given to the fundamental factors that drive economic growth and structural improvement. In terms of policy, it is imperative to enhance the ‘autonomy’ of macro policies. We should occupy this window, fundamentally reverse the economic trend, and assist the capital market to construct stable market expectations and policy expectations before the international situation undergoes further evolution, hence coping with a better response to the changes in external factors.

It would be difficult to reverse the situation after market expectations have shifted. When combined with a self-reinforcing impact, it frequently leads to a downward spiral vicious cycle in the capital market and the actual economy. Hence, it is hard to reverse market expectations without stable policy expectations. Judging from the economic data of the first quarter, the overall economy is still resilient and possesses a stable foundation. However, to achieve the economic growth target of the current year, it is still necessary to strengthen the implementation of macro policies. This is not only conducive to the stability of the capital market but for the overall economy as well.

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Education Must Come First in our Global Economic Agenda

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A 13-year-old girl solves a maths sum at a school in Gujarat, India. © UNICEF/Mithila Jariwala

With leaders gathering at this year’s World Economic Forum, it’s time to prioritize the impact investments in education bring to businesses, economies and beyond.

As all eyes turn to this week’s World Economic Forum in Davos, we call on world leaders and world-leading businesses to put education at the heart our global social and economic agenda.

Education is our investment in the future, our investment in sustainable economic growth and global security, our investment in the vast potential of our collective humanity.

To realize our goals of delivering equitable, quality education to every girl and boy on the planet – especially those caught in armed conflicts, forced displacement and other protracted crises –  we must activate a global conscience and commitment, and create a value proposition that shows businesses, politicians and the general public just what an investment in quality education means for our world.

This means pre-schoolers can learn to read and write in safe environments. It means girls can become entrepreneurs and doctors – not child brides. It means boys can be teachers and lawyers – not soldiers.

It means refugee children and adolescents displaced by conflict, climate change and other crises in hot spots like Bangladesh, Colombia, the Sahel and Ukraine can go on to complete 12 years of education and become leaders of a peaceful and healthy society.

It means college and beyond, a smarter workforce, and greater socio-economic stability. It means an end to poverty and hunger, establishing gender-equality, and advancing human rights for all.  

Unravelling the challenge

This is one of the most complex problems ever to face humanity. When Education Cannot Wait (ECW) – the UN’s global fund for education in emergencies and protracted crises – was established in 2016, an estimated 75 million crisis-impacted children and youth did not have access to the safety, protection, hope and opportunity of a quality education. That number has risen to an estimated 200 million in recent years as we see a rise in conflicts, displacement, climate disasters and a deadly pandemic that has upended our progress to achieve the Sustainable Development Goals by 2030.

While a minority of people on the planet are enjoying all the comforts of modern life – and football teams sell for more than $5 billion – over 617 million children and adolescents worldwide cannot read or do basic math. That’s more than the total population of ECW’s three largest donors – Germany, the United Kingdom and the United States – combined. 

Nevertheless, to date, less than 3% of government stimulus packages have been allocated to education, and in low- and lower-middle-income countries, the share is less than 1%. We can and must increase this government funding three-fold, following the example of the European Union, which announced in 2019 that it would increase education spending to 10% of humanitarian aid.

Government aid alone isn’t enough

The private sector, businesses and philanthropic foundations like The LEGO Foundation, Dubai Cares, Verizon and Porticus are already activating significant investments into the space.

We need to bring in more funding from industries closely connected with education – like Google, CISCO and Microsoft – and from those which have a vested interest in ensuring global economic stability and resilience, like the Jacobs Foundation, Western Union and Hilton Foundations of this world.

As we embrace the spirit of Davos – “to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance” – it is clear that this is a global issue that won’t just impact the rights and life trajectories of the world’s most vulnerable children, it will impact the bottom line for businesses, disrupt global socio-economic stability, and affect us all if we don’t act immediately with decisive action and collective humanity at the forefront. 

Building together

Education Cannot Wait has already mobilized over US$1 billion over a few short years and reached approximately 5 million children, but it is simply not enough.  

In the next three years, with the support of donors, the private sector, philanthropic foundations and individuals, we need to mobilize at least an additional $1.5 billion. This needs to happen with the leadership of the G7, the resources and know-how of the private sector partners featured at this year’s World Economic Forum, and the enhanced commitments that will make headlines at this year’s Transforming Education Summit, convened by the UN Secretary-General.

This will enable ECW and our strategic partners to respond immediately and effectively to the education needs of at least 10 million children and adolescents – including 6 million girls.

Think about the ROI. This works out to just $150 per child. If each of the world’s Fortune 500 companies made just a US$15 million contribution, we could surpass our goals and reach 100,000 children per donation! That’s 50 million more children with an education, 50 million more children breaking the hunger and poverty barriers, 50 million more opportunities to provide certainty in the face of very uncertain economic times.

Think about the future. If you could future-proof your business for the next 30 years with such a simple investment, wouldn’t you do it? Investment in education is good for the bottom line. With increased security and economic opportunity in the Global South, we are opening new markets, increasing economic resilience and building a more prosperous world.

Think about the legacy. For every $1 spent on girls’ education, we generate approximately $2.80 in return. Making sure girls finish secondary education could boost the GDP of developing countries by 10% over the next decade.

Think about scale. For every dollar raised, ECW and our strategic partners are leveraging about a dollar. This grows impact exponentially.

Think about our place in history. This is our moment to transform education for those left furthest behind. Please join us in ensuring every girl and boy – no matter who or where they are – has the opportunity to go school, to learn, to grow and to achieve their potentials not just for a day, but for a lifetime.

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Economy

The Politics of New Global Borderless-Class

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No, they are not the immigrants; they are citizens of a country in their own habitats, but active in yours. Slow circumnavigation of our earth will only prove that at the bottom of the population of each nation now there exists a new borderless-class slowly rising. Firstly, they are effortlessly, technology supported, secondly, squeezed out of imbalances, injustices and inhuman entrapments, thirdly, engaged in ‘nouveau occupationalism’ with virtual hopping from nation-to-nation all in the same typical routines of a normal day.

Fourthly, they are screaming silently, they see the global problems in desperate need of global solutions. Nevertheless, still inaudible in the political rotundas slowly they now become the force challenging old models of governments.

Study Pakistan, Sri Lanka and dozens of population-rich nations of the free world, notice the restless citizenry and their social media centric mobilization of dissent and protest narratives. As in coming months, peak temperatures will further fry the incompetence of the lingering economic bureaucracies. The sizzle is awakening, the awareness of incompetency on the rise. Unless grassroots prosperity issues are boldly addressed the economic fakery clearly visible on trillion blinking devices. Such blinks do not prove neither fame nor popularity but points to a silent ocean ready to drown them. What are the most important and dramatic roles that these borderless-classes will play in our behavioral economies and future demographics? Observe the goals, vision and narrative of Imran Khan of Pakistan.  Notice the silent Australians and polls in dustbins… 25 more national elections ahead.

Why elitism was multinational: Observe, in contrast, for centuries, only elites allowed global games; multinational organization with multinational rules of engagements. Today common folks are on the same platforms. They, born in a country but grew up in another country, work in some other continent and eventually settle in another new country. Exposed to massive digitization, access and internalization of rules of engagement in a massive global society with residency in multiple jurisdictions they are different.

Now Face-to-Face around the world: Compared to previous generations, the new borderless-classes are extremely well informed, this significant feature makes them locally, regionally, nationally and globally interconnected and creates a game changer. Most dramatic economic behaviorism of this borderless dynamic is face-to-face engagement around the world, while remote. Previous elite borderless-class was jet- set dependent.  It will take some deep yoga exercises to figure out mathematical variations to measure the power of their productivity of these hush-hush global whisperers.

What is the world waiting for? What does all this mean to the institutionalized bureaucracies, nestled in governances of the nations of the so-called free world, awaiting a nuke-flash? Perhaps nothing, or shocking realization that masses are discovering by the day how artificially created pre planned economic dramas are hurting local grassroots prosperity. Most importantly, they are equipped and capable to see the root causes and equally to recognize the available workable options. This is the difference.  Unlike some generations fooled sometimes or some all the times but this global-generation cannot fool all the time.

Is this brain drain or invasions of skilled minds?
The coin-operated competency of the Gig-economy now takes notice…

Most difficult questions; almost numbing most bureaucracies of the free world; when billions are already displaced due to pandemic, a billion replaced due to automation and a billion in wrong mismatched mandates how such masses are handled before they move towards populists viewpoints. Such shifts measured as unemployed now occupy remote work for overseas assignments and equally when local workers pushed over by higher skilled workers at half prices but working as foreign workers without paying taxes or contributing to the local societies. Is this brain drain or invasions of skilled minds?  The answers now buried in the several decade long abundance of higher quality upskilling and reskilling in hands of the leading nations of the free world points to massive breakdown of skilled citizenry. Study Expothon on Google on such issues, notice what is changing the thinking…

Only fake economies fail, as only houses built without builders and architectural rules collapse.  Observe the root causes of the last few financial crises. How such collapses systematically occurred, how the whole world of finance, quietly went so wrong, no punishments or lessons, just silence? Now all wait for the repeat performances.

Unfortunately, the jobless cannot create green economies and jobseeker mindsets cannot build new economies, therefore, bold, authoritative narrative on entrepreneurialism needed to bring the job creator mindsets in collaboration as the new art and science and combine both mindsets are going forward strategy. Is climate change a global politics or an entrepreneurial challenge, find the answers.

Study why capitalism is not the one failing: It is actually economic development. Winners of the future not necessarily are the visible rich and power of today. Notice the rising power of the bottom societies. Value creation economies when they become beneficiaries of primarily institutionalized value manipulation economies they become open public frauds. Nations without clear and decipherable narratives on economic fronts with national mobilization of entrepreneurialism will not create a distinct advantage.  Learn fast, fail fast, but move

Nations must demonstrate superior skills to build economies and not wars, creation of armies of entrepreneurs and new valleys of new enterprises.  Only in-depth discussion and nationally televised debates about such economical mysteries will highlight the answers. The silent new borderless-classes of the free economic world are now learning how to fix their government, how to bring change and how to create grassroots prosperity. The rest is easy. 

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