Remitly: How Fintech can increase access to financial services and remittances for immigrants
The transfer market is currently valued at $802 billion, with the potential to reach $1.2 billion by 2030. Digital channels are at the center of this huge market opportunity as they provide faster transfers, a better user experience, more transparency, improved customer service and much more .
Remitly is a provider of digital financial services/remittances for immigrants and their families. It believes that immigrants typically face expensive or misleading financial services, designed to take a disproportionate share of their profits.
Recently, Remitly conducted a survey of its customer base and found that despite almost eight in 10 customers experiencing negative financial changes in the past 12 months (due to inflation, rent/mortgage increases, medical costs and more) said very few that they were likely to send less money (six per cent) or less often (seven per cent) – showing the incredible resilience and determination they have to provide for their families abroad.
Matt Oppenheimer has spent the better part of a decade making financial services better for immigrants and their families. As CEO and co-founder of Remitly, Oppenheimer discussed the economic impact immigrants have on local and global communities, and why the financial services industry must make strides in providing better and more affordable financial services for them:
How fintech can increase access to financial services for immigrants
Immigrants have a significant impact on global economies. The money they spend and the taxes they pay contribute meaningfully to local economies, while the funds they send home, known as remittances, have a critical impact on foreign economies.
By 2022, the global formal remittance market was valued at approximately $802 billion. By 2030, it is projected to reach $1.2 trillion, registering a compound annual growth rate of more than five percent. To contextualize the size and importance of this market, according to united Nationsglobal remittances are over three times larger than the amount of official development assistance (ODA) and foreign direct investment (FDI) combined.
Digital channels are at the center of this huge market opportunity as they provide faster transfers, a better user experience, more transparency, improved customer service and much more. Digital services can also offer more cost-effective fees, returning millions of dollars in purchasing power to immigrants worldwide.
With digital money transfers leading the charge in this market, it is time for the fintech industry at large to rise to the challenge and think bigger. Fintechs have the opportunity to catalyze change by creating inclusive financial technology that supports immigrants in a truly impactful way.
Impact of immigrants on economies
Worldwide, there are more than 280 million immigrants, including 44.9 million in the United States alone – larger than the population of the state of California. It is then no surprise that immigrant communities contribute significantly to the global economy through capital, labour, culture and much more. This contribution fuels economic prosperity for generations to come and is even considered a necessity for most nations – including the United States, whose economy would largely struggle to grow without it.
Contribution to capital
Research from FWD.us found that increasing annual immigration would increase US GDP from $20.94 trillion (current GDP) to $47 trillion (in today’s dollars) by 2050. Another study published by UCLA a found that the United States could add $1.5 trillion to the economy and $367 billion in federal and state tax revenue if we granted citizenship to all unauthorized immigrant workers living here.
This will increase GDP per capita and consequently raise the standard of living for all Americans. According to a, second-generation immigrants are among the strongest fiscal and economic contributors in the United States.
There is endless research showing that the prosperity of immigrants resonates with the local communities in the country where they live. On the flip side, a reduction in immigration will hinder economic growth, according to the same research study from FWD.us.
Contribution to the Labor Party
For some industries in the United States, immigrants make up a third of the workforce. This increased workforce has helped the economy respond to worker shortages and fill skill gaps. It also helps aging populations by increasing employees’ relationship with pensioners, and strengthening social security benefits.
In terms of job creation, a study co-authored by a MIT economist, found that per capita immigrants are about 80 percent more likely to start a company compared to US-born citizens; and these companies have, on average, about one percent more employees than companies founded by Native Americans. It is also worth noting that four of the top seven public companies have immigrant CEOs.
Contribution to culture
Immigrants feel nostalgic for their homelands, which are often thousands of kilometers away, and find solace in their new homes through cultural pursuits. At the same time, natural born citizens appreciate and benefit from the vitality of new multicultural additions. These contributions come in various forms, including artistic, culinary, athletic, scientific and more.
As an example, Los Angeles, California is often seen as a top American food destination, with many of its most beloved dining experiences founded or inspired by immigrants. The award-winning restaurant, Guelaguetza was opened by immigrant entrepreneurs Fernando López and Maria Monterrubio, and offers eager customers a selection of authentic Oaxacan cuisine. Well-known restaurantParker BBQlocated in the heart of Koreatown, is owned by Jenna Kiman immigrant from Seoul, whose roots inspire her cooking.
On the opposite coast, New York City, one of the most culturally diverse cities in the United States, hosts over 60 million visitors each year; one of the main attractions is the dynamic art scene that has an ever-increasing number of immigrants influencing. A report from Center for an urban future revealed that between the years 1990 and 2020, the number of immigrant artists in the city increased by 69 percent to around 51,000 at the time of the report.
These are just a few examples of many that show the influence and importance of the cultural contributions immigrants share with the world.
Fintechs that build and develop products should do so with immigrants in mind. They should create inclusive products and services that take into account the needs of this diverse group of people – not just for the benefit of global economies, but because it’s simply the right thing to do.
Immigrants’ economic resilience
In the wake of the covid-19 pandemic, the world has struggled with economic turbulence resulting in increased unemployment, supply chain disruptions, product shortages and rising inflation to name a few.
Although the unrest has affected everyone on a large scale, it has had a disproportionately greater impact on immigrants. Facing economic hardship while still maintaining the necessary level of support for their families back home often means that immigrants have to cut back on their personal expenses, leading them to take on new jobs and increase their working hours.
It is important to understand that remittances have historically proven resilient in times of financial crisis due to their non-discretionary function and immigrants’ unwavering commitment to their loved ones. So, in times of economic hardship, immigrants not only feel the impact on their personal circumstances, but they bear the added responsibility of ensuring continued financial support for foreign families who depend on them.
The Fintech industry’s unique opportunity
The fintech industry has the unique opportunity to create inclusive solutions that positively affect the immigrant environment. The opportunity exists because technology fosters innovation and adaptability, empowering businesses to deliver solutions that serve a wider range of customer needs and unique requirements, in a way that traditional financial services cannot.
With this in mind, fintech players must seek to understand the institutional barriers that exist within financial services for immigrants in order to leverage the technology and rise to the occasion.
Older players in the space use old-fashioned technology that prevents customer-centric solutions and changes. Fintechs on the other hand, given their digital-first roots, have an edge on innovation and execution, creating a superior customer experience.
Fintechs also have the unique advantage of being able to innovate quickly as a result of startup and entrepreneurial thinking, moving quickly to test new ideas and products. While we have seen massive growth in the financial services industry with legacy players doing what they can to adapt to the transition to digitalisation, we predict fintechs will continue to lead innovation in financial services.
Call fintech players
Immigrants are essential for the economy. However, they have not been able to take full advantage of the current financial industry. A primary reason is that the enormous economic impact this diverse group of individuals has on their communities of residence often goes unnoticed, and as a matter of course the economic impact on them also goes unnoticed.
So, what is the most important difference when it comes to supporting this historically underserved community? Financial services.
Traditionally, immigrants have encountered expensive and/or misleading financial services. In particular, these services have taken a disproportionately high percentage of profits. This makes the effort for financial services much higher for immigrants with family members in low-income countries because they use these funds for basic necessities such as housing, food and clothing.
Yet the resilience and dedication of immigrants to their families is unwavering, despite how counter-cyclical it may be for their lives. The financial services industry should take a page out of this handbook and give them back the great service they have done us.
Fintechs that build and develop products should do so with immigrants in mind. They should create inclusive products and services that take into account the needs of this diverse group of people – not just for the benefit of global economies, but because it’s simply the right thing to do.
