The inefficiency and high expense associated with remittances has been highlighted all week at the conference. On Monday, Dave Mitchell, head of National Payment Systems Development at the South African Reserve Bank, pointed out that the use of remittance had declined by 7-10% in 2009 due, in part, to the high cost involved, particularly in the developing world.
For example, the fee involved in sending a sum of $200 between certain African countries such as Botswana, Swaziland and South Africa, can be as much as $54. Mitchell said that this inefficiency had been noted by the G8 which has endorsed the 5x5 objective, which aims to reduce the average cost of remittance from 10% to 5% of basis points over the next five years.
"This can be achieved with new technology that improves performance and reduces efficiency," says Mitchell. "There's never been more support for strengthening central bank leadership and fostering payment system development and this is good for both banks and businesses."
"Remittances are an important part of cross-border flows and a reduction can affect countries GDP," says Mitchell who adds that remittance contributes more than $450m to South Africa's economy. "This figure will be hard to quantify if we don't have a good remittance process. Instead transfers will take place on a bus or between friends which makes it much harder to measure."
Massimo Cirasino, head of the Payment Systems Development Group at the World Bank, believes it is vital to link remittance to other financial products such as micro-insurance credits.
He is less enthusiastic, however, on the potential of mobile phone-based remittance payments. "Everyone makes a big thing about the growth of mobile phones but most people have more shoes than they do phones. We all have at least two. So why not put a chip in a shoe?"
The Swift workers' remittances framework, launched today, consists of contract templates, a market practice for service levels and product definitions, reference data services, ISO 20022 standards and a messaging service.
The Brussels-based co-operative says the scheme has been tested with a group of pilot banks and showed a decrease of 80% in cost, and a reduction from six to two months in the time taken to set up a new counterpart compared to proprietary bilateral arrangements.