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International money transfer is a huge and competitive industry. Before 2020, the industry was booming. The amount of cash migrants from low-and middle-income countries sent home to their friends and family reached a record $548 billion in 2019 but is projected to decline 14 percent by 2021 due to worldwide shutdown for COVID pandemic.
Migrants and their families from low income or mid income countries who rely on remittance, they are heavily hit by the pandemic. They also don’t have access to digital platforms. Facilitating digital remittances would require improving access to bank accounts for mobile remittance service providers as well as senders and recipients of remittances.
However, digital transfers are breaking down borders for foreign migrant workers of high/middle income group countries, during the pandemic. Large companies like Western Union, Moneygram, gaining mostly from their digital business in 2020. Also, fintech startups like Transferwire, RIA, giving a strong competition to the traditional ones in term of digital innovations and customer base.
In post Covid world, a structural change in the international money transfer market can be seen. People are expected to be more comfortable and absorbed by the digital platforms.
By reducing the number of middle men in process of transferring, digitization brings contactless payments, fast timings and lower fees.
When historical trend of remittance flow is observed, a crisis expectedly reduces the flow of remittance as people loose jobs, then the aftermath the crisis the flows rebound sharply as people overcome.
Lastly, remittances once again come to an average level like before the crisis. But also, COVID19 is surely much more severe than any other crisis happened.
Still in the long run migration flow is expected to increase significantly as well as remittance. The wide income gap between high- and low-income countries (i.e., 54:1) will drive the growth of remittance market.
Since IndusInd Bank and NPCI have partnered to make cross-border money transfers possible using the beneficiaries’ UPI IDs, Indians can now receive remittance money from their abroad sources much more easily.
By doing this, sending money won’t require you to remember your bank account information. IndusInd Bank announced in a statement that it has partnered with NPCI to provide its money transfer operator (MTO) partners with real-time cross-border remittances to India utilising UPI IDs.
With this effort, IndusInd Bank has become the first bank in India to use UPI for international transfers or remittances from NRIs.
According to this agreement, the MTOs will link to the NPCI’s UPI payment systems via the IndusInd Bank channel for cross-border payment validation and settlement into beneficiary accounts. IndusInd Bank has initially begun using DeeMoney using UPI to send foreign inward remittances (FIR) to Thailand. Money transfers and currency exchange services are provided by DeeMoney, a Thai provider of financial solutions.
One can effortlessly send money by adding the Indian beneficiaries’ UPI IDs to the DeeMoney website. For cross-border payments via UPI, IndusInd Bank stated that it also has plans to add more partners in a number of other nations in the near future.
It’s a huge step in streamlining the functionality of remittances because people living abroad may now easily transfer money to a beneficiary by adding their UPI IDs, rather than having to remember their bank account information.
Enabling overseas remittance using UPI is a significant step toward enhancing its utilisation as a platform and will significantly increase NRIs’ adoption of it worldwide.
Using UPI, the effort will make remittances for overseas travellers considerably easier and more effective.
MakeMyTrip’s fintech branch, TripMoney, has acquired a majority share in forex services firm BookMyForex. BookMyForex’s portfolio of services, which includes currency exchange with real-time exchange rates, multi-currency prepaid forex cards, cross-border remittances, and other ancillary goods, will be rolled out soon for the benefit of MakeMyTrip and Goibibo clients, thanks to this funding.
Customers in numerous cities across India will be able to get their forex needs met through BookMyForex’s broad network of partners, which includes chosen banks and reputable exchange providers.
The purchase of a majority stake in BookMyForex is in keeping with our strategic goal of creating a travel super app with a full range of services for discerning travellers.
Faering Capital, as well as the company’s founders and promoters, will continue to invest in BookMyForex.
Technology Behind Crypto Can Also Improve Payments, Providing a Public Good A new kind of multilateral platform could improve cross-border payments, leveraging technological innovations for public policy objectives.
For many users, crypto assets have been a disappointment rather than a revolution, and global organisations such as the IMF and the Financial Stability Board have called for stronger regulation.However, some of the quickly growing crypto technologies may eventually hold more promise. The private sector is constantly inventing and personalising financial services.
Tokenization, encryption, and programmability are examples of new payment technologies. Tokenization is the process of expressing ownership rights to an item, like money, on an electronic ledger—a database shared by all market players that is designed to be publicly available, synchronised, quickly updatable, and tamper-proof. Anonymity of token balances and transactions is unnecessary (and actually damages financial integrity).
Encryption aids in decoupling compliance checks from transactions, allowing only authorised parties to access sensitive data. This increases openness while also fostering trust.
Programmability enables financial contracts to be written more simply and automatically implemented, as with “smart contracts,” without the need for a trusted third party.
Innovation in the private sector.With these new tools, the private sector is innovating in ways that might be more transformational than the first wave of crypto assets: tokenization of financial assets, tokenization of money, and automation.
Tokenization of stocks, bonds, and other assets has the potential to reduce trading costs, integrate markets, and broaden access. However, paying for such assets will necessitate funds on a suitable ledger. Stablecoins are one example, to the extent that they conform with regulations.
Banks are also experimenting with tokenized checking accounts. And automation is common, allowing third parties to programme functionality in the same way that developers make smartphone applications.
Even if the private sector pushes the bounds of innovation and customisation, it cannot guarantee that transactions are secure, efficient, and interoperable.
Instead, the private sector is expected to establish client-only networks for exchanging assets and making payments. Open ledgers may arise in an attempt to bridge private networks, but given the low economic potential, they are likely to lack standardisation and appropriate investment. Using private money to settle transactions would also put counterparties at risk.
The role of the central bank, Because of its dual nature as a monetary instrument—a store of value and a form of payment—as well as infrastructure required to clear and settle transactions, digital currencies can be of assistance. Policy debates have mostly focused on the first element, but we believe the second should be given equal weight.
CBDC, as a monetary instrument, offers security; it reduces counterparty risk and increases payment liquidity. CBDC, on the other hand, as infrastructure, might improve interoperability and efficiency across private networks for digital money and even assets.
Payments might be conducted between private funds using the CBDC ledger or platform. Money might be escrowed on the CBDC platform and then released when specific circumstances are satisfied, such as the receipt of a tokenized asset.
Furthermore, the CBDC platform might provide a basic programming language to guarantee that smart contracts are trusted and interoperable with one another.
In the digital world of the future, this will also become a public benefit.A public platform might enable banks and other regulated financial entities to exchange digital representations of domestic central bank reserves across borders.
Participants might trade secure central bank reserves without being explicitly controlled by each central bank, nor would significant modifications to national payment systems be required.
Again, transactions need more than just the transfer of cash. Risk sharing, currency exchange, and liquidity management are all included.
Money may be transacted simultaneously because of the single ledger and programmability, removing the chance of one side being left out. More generally, it is possible to create risk-sharing agreements, sustain sparsely traded currency markets using auctions, and automate capital flow restrictions (which are already in place in many nations).
The platform would significantly reduce the risks associated with such contracts. In order to prevent unsuccessful transactions, it would make sure that contracts are completely backed by escrowed funds, automatically performed, and consistent with one another.
Consider the possibility of using a contract for a payment due tomorrow as security today, which would reduce the cost of holding idle cash.Encryption can control the transfer of information in addition to the transfer of currency.
For instance, the platform might verify that users adhere to anti-money laundering regulations while still allowing them to place anonymous bids on items like foreign exchange while still being able to view the overall balance between bids and asks.
