The World Bank’s new paper titled Migrant Remittance Flows: Findings from a Global Survey of Central Banks has some interesting conclusions including this one:

  • High cost is perceived as the top single factor inhibiting migrants from using formal channels for remittance transfers. A large majority of survey respondents also cited factors that, taken together, indicate mistrust of or lack of information about financial systems, products, and channels.

The finding regarding cost not new, in 2007 the World Bank estimated that a reduction of remittance commission charges by 2-5% would increase the flow of formal remittances by 50-70%. However, given the trend for reducing remittance costs, it is positive for operators that these findings remain valid. Positive because the two main drivers for international mobile money transfers are reduced cost and increased access. Using mobile and the associated technology platforms can dramatically lower the cost profile for remittances, allowing operators and their remittance service provider partners to pass this on to the consumers.

The second component of the finding, that there is a lack of trust or understanding of financial products, presents an opportunity for operators and highlights one of the critical success factors for any mobile money product. Given that operator brands are amongst the most recognisable and trusted in the developing world, operators are the perfect companies to provide remittances. An excellent survey conducted by FSD last year showed that over 90% of M-Pesa users in Kenya felt their money was safe in the system. Clearly operators are equally or better positioned in developing markets to leverage consumer trust for international mobile money transfers.

Theoretically then, operators are trusted to provide mobile money transfers. However, that doesn’t address the lack of consumer understanding about formal remittance products. This can only be addressed through educational marketing. According to the same FSD survery mentioned above, 72% of Mpesa users found out about the service through advertising. This goes against the prevailing view that mobile money products grow through word of mouth but clearly highlights the need for operators wishing to deploy mobile money transfer services to invest in educational campaigns if they wish to grow the formal market.

The World Bank report should serve to remind operators that there is an opportunity in developing markets to leverage their customer relationships and technology platforms to increase the formal remittance market.