Aarkstore Enterprise
The money transfer market or the remittance market is extremely large and has been growing at a steady rate over the last two decades, driven mostly by a combination of long-term trends relating to immigration flows, disparities among national economies and technological innovation.
But the remittance from overseas workers, which is a financial lifeline for many developing countries, is under pressure as a consequence of the downturn in the global economy. With global GDP expected to contract by 0.9% in 2009 and with recession hitting the key destinations for migrants especially the United States, the European Union and the Gulf countries, the flow of remittances is expected to decline considerably in the year 2009. The developing countries that are popular for the export of labor have already started facing the inevitable problem of declining remittances with companies across the globe having started shedding employees.
And with declining volumes of global remittances, the formal and most popular channel for money transfers i.e. MTOs or Money Transfer Organizations are facing a decline in their margins. But the factors that are supporting the growth of revenues of MTOs are the shifting remittance volume from informal and illegal channels like the hawala system to the formal channels (as a result of stricter regulations on the backdrop of terrorist activities).
Another factor that is working in favor of most formal money transfer channels is the expanding networks of MTOs and the growing base of banks, especially in the remote regions of the developing countries. Technology is also playing a key role with mobile money transfers gaining huge popularity. Mobile money transfers are not cannibalizing the traditional money transfer markets as this channel is increasingly being used for transferring smaller amounts of money and hence also leverage by the MTOs.
The formal money transfer industry is highly fragmented with MTOs like Western Union, MoneyGram and Ria (Euronet) controlling a very small share of the total money transfer market. As the smaller and local players hold majority of the share but does not have enough financial strength for further investments or market their products and develop their brands, the global MTOs can leverage this opportunity and get a foothold in the regional markets.
The report titled “Global Money Transfer (Remittance)
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