Money transfer trends in fiscal year 2023's Q4: Significant patterns in remittances reported in corporate earnings
A new report has shed light on the latest developments in the money transfer and remittances industry, examining the performance of five of the largest publicly traded companies: Western Union, Intermex, Remitly, Euronet's Money Transfers division (which includes Ria, Xe, and Wise's personal business), and Wise's personal business.
The report, which is part of a series, aims to provide insights into the development of the industry and the direction of key trends. It analyses the companies' FY and Q4 2023 earnings, key metrics, the frequency of keywords in their earnings calls, and the transaction rates for Q4 2023.
One of the key findings is the growth in global remittance flows. In 2023, global remittances reached around $883 billion, with expectations to rise further to about $913 billion by 2025. This continued growth trend follows a surge during the COVID-19 pandemic, which saw year-on-year increases exceeding 10% between 2020 and 2021. However, the growth rate has since normalized but remains positive.
Another significant trend highlighted in the report is the stronger growth in lower-income countries. Remittances to lower and lower-middle-income countries were substantial, reaching over $650 billion in 2023, underscoring the critical role remittances play in supporting these economies.
The report also discusses regional variations and informal flows, noting that while formal remittance channels show consistent growth, a significant volume—estimated between 35% to 75% of official flows—passes through informal channels, with marked regional differences. Higher informal flows are observed in Sub-Saharan Africa and Eastern Europe, while lower rates are seen in East Asia Pacific.
The industry is still facing high transaction costs in many regions, influenced by factors such as banking sector concentration, financial system depth, and currency volatility. These factors affect the cost-effectiveness and competitiveness of remittance services.
Proposals like a 3.5% remittance tax in the U.S., targeted at non-citizens sending money abroad, feature prominently in policy debates and could affect the industry dynamics, especially impacting remittance flows to neighboring lower-income countries.
The report emphasizes a focus on identifying opportunities for growth within the industry. It also discusses new strategies being employed by the industry's biggest players as the industry continues to evolve. However, the report does not provide specific details about the new strategies being employed by the companies.
The continued rise of digital platforms in the remittances sector was noted in the report. The report covers the FY and Q4 2023 earnings of the mentioned companies and compares their performance to analyse industry growth, market share, and digitization trends.
The average revenue per unit (ARPU) for money transfers was measured in Q4 2023 for the same companies, and the total volume of money transfers handled by these companies in FY 2023 was reported. The report does not discuss the financial performance of any companies outside of the five mentioned.
The strong earnings season for most publicly traded remittances and money transfers companies in 2023, particularly in Q4 and FY, was also noted in the report.
In summary, the report suggests a steady growth trajectory for leading publicly traded firms in money transfer and remittances, driven by sustained demand and expanding migrant populations, but tempered by regulatory risks and ongoing challenges in reducing transfer costs.
The report highlights the growth in global remittance flows, with predictions of $913 billion by 2025, following a surge during the pandemic and subsequent normalization but remaining positive. (finance)
Another significant trend is the stronger growth in lower-income countries, as evident in the substantial remittances to lower and lower-middle-income countries, underscoring their critical role in supporting these economies. (finance)
