Worth over $600 billion to global economies (over $400 billion of that is to developing nations), remittances are big business, and act as a lifeline for millions across the developing world. Yet, despite all attentions on the massive impact that Open Banking will have on banks, consumers and economies, the industry mustn’t forget about one major obstacle hindering future development: Monopoly Remittances.

In 2009, the 35th G8 Summit launched a plan to change the face of global remittances; making it more competitive, fairer for the 232 million migrant workers across the world, and ultimately adding billions to global economies. Termed the “5x5” objective, Canada, France, Germany, Italy, Japan, the United Kingdom and the United States committed to reducing global remittance costs from 10% to 5% by 2014 (five years). Yet now in 2018, almost 10 years on, this goal still seems like a distant dream with global remittances still hovering around the 7% mark and places in Africa, like South Africa at nearly 18%.

Remittances Uncle Pennybags

Unfortunately, despite many positive strides over recent years, the industry has been, and largely still is, dominated by a few big players who can set any exchange rate they want. To make matters worse, those players have taken advantage of their situation – and increasing their dominance at the same time – by imposing exclusivity agreements with agents. It means they are unable to work with any other money transfer operators that could offer reduced rates.

This lack of competition, and ultimately choice, has hurt those requiring financial assistance from loved ones to help with everything from education and keeping a roof over their head to medical bills and putting food on a table. And, the impact on global economies is massive; it’s predicted that reducing the cost of global remittances could generate an extra $16 billion for families in the developing nations. What’s more, the Overseas Development Institute calculated that Africa alone could be losing out on $1.8bn just because of excessive charges on money being sent home by workers in the rest of the world. It’s enough to put four million children into school and provide safe water to 21 million people.

Tech(ing) a shift in mentality

With such an obvious issue to be addressed, what can be done to reduce the commonality of these exclusivities and the impact they make?

The simple answer would be for the industry, governments and regulators to come together and banish them – we’ve already seen exclusivity deals successfully banned in Russia, Pakistan and Oman. What’s more, India has also recently pledged to support the cause of reducing remittance costs to 3% by 2030, which is a good step in the right direction.

If the industry comes together to work towards the larger cause, rather than pursuing individualistic gains, we will have an open remittance market place. This could lead to a new era of innovation within the sector, with companies more willing to partner and offer migrants even more options. If the costs can be reduced, then migrants will be more willing to use these services on a more regular basis, in turn increasing the value of the market. The future of the remittances looks bright, but there’s still a lot of work to be done to put an end to the monopolies stifling the industry and developing nations.