Expert opinions, FINANCE

Where is digital remittance market going?

Unistream has summed up the economic results of 2021 for the money transfer market. The company, one of the largest market players, shares its outlook for the sector for the next few years.


The global digital remittance market showed a solid growth in 2021, mostly due to the labor migrant population. Thus, in countries with average or low incomes, the volume of digital remittances grew by over 7%, or hundreds of billions of US dollars.

According to a World Bank report, remittance flows grew even more than it was predicted by analysts who based their forecast on the 2020 developments. Amid the global recession caused by the COVID-19 pandemic, the money transfer market dropped by less than 2%. However, the situation varies from country to country.

It is noteworthy that in some countries with low incomes, the volume of incoming payments exceeded the volume of direct foreign investment, which means that this tool plays an important role in many developing economies. In particular, money transfers serve as a sole option for such post-Soviet states as Uzbekistan, Tajikistan, Armenia, and some others. Due to incoming money flows from labor migrants who work in Russia, a large number of households receive significant support for purchasing essential goods and food, as well as receiving medical and education services.

This year, money transfers from Russia have shown a record growth in the past six years; this mostly applies to remittances to the CIS countries. From July through September 2021, cross-border remittances to these countries from Russia reached almost $2.3 bln.

It is noteworthy that amidst the raging pandemic of 2020, many labor migrants left Russia due to the unstable conditions in the labor market and a high volatility of the ruble. Although the situation has now returned to normal, the country is still facing an acute labor shortage.

The Russian government is making efforts to attract additional labor resources, as the number of migrants has not yet reached the 2019 levels. Last summer, it was reported that an inflow of citizens from the CIS countries was initiated to solve a pressing problem of a lack of labor force in construction, housing and public utilities, as well as in some other sectors. Analysts link the growth in remittances not only to a greater activity of labor migrants, but also to the stabilization of the Russian currency. The Bank of Russia has reported that Uzbekistan, Tajikistan and Kyrgyzstan have become major remittance destinations, with an increase of 20–35%. Russia ranks first in terms of money transfers to Georgia, with the growth of 15% against last year.

Market developments and possible tougher regulations

In the summer of 2021, information appeared that the government was looking for additional sources of revenue to replenish the budget. In this regard, the Ministry of Finance began considering a possible fee for money transfers by individuals to foreign countries, with the fee amount of 1%.

Currently, citizens of different countries use several remittance methods, ranging from regular bank transfers to payment system services. On the one hand, the remittance market is highly competitive, with market leaders taking efforts to attract clients with lower fees amidst the emergence of new innovative products. Some players have introduced fees of less than 1% for money transfers to popular destinations. In this case, the considered amount of 1% is very large. On the other hand, in case an additional remittance fee is introduced, millions of people — who include a significant number of labor migrants — will look for other options to send money to their families as the new fee will actually turn into an additional tax for them.

Let’s not forget that the legislation envisages rather expensive ways of regularization for migrant workers, who pay higher taxes on their small earnings and make efforts to save the money they earned while having to live in difficult conditions. Few of them can afford to rent or buy housing.

Including this tax in the revenues of payment systems or banks is also out of the question as such move could become economically unviable for many players in the money transfer market; in case a need arises, operators will make attempts to pass costs on to their clients.

There are few possible scenarios: most likely, the volume of officially recorded remittances will significantly drop, and people will look for other ways to transfer money. This will possibly shadow a certain share of the market. It is also possible that the issue of labor shortages will become more pressing as citizens from CIS states, which have traditionally supplied labor resources to Russia, will seek other ways to earn money, and the country’s popularity for labor migrants may decrease.

Any of these scenarios is negative, so it is possible that a decision will be made to satisfy all parties. No one disputes that the government has the right to expect proceedings from labor migrants’ remittances — however, the fee amount should not lead to drastic changes in the entire remittance market.

Today we can see that most of the existing services are becoming more technologically advanced, safer, and more user-friendly. Many market players are developing and implementing technologies for instant mobile money transfers. We also see that the market is becoming attractive to new players that have not previously provided such services to their clients. In particular, Russia’s leading banks have joined the race as they saw advantages of attracting additional users, including labor migrants.

In the coming years, we will see intensified competition, which means that clients can expect more favorable and convenient remittance conditions. We will also see new products that are not always directly related to money transfers. Unistream Bank is introducing new services that may be useful for some part of the target audience of a financial organization. This is not solely about financial products: in early 2021, a job search service for migrants, Uniwork, was launched to help them quickly and safely find a good job in Russia.

There are also other newly developed products that make life easier. The market will inevitably change within the next few years to become more innovative and transparent. We can also see new players that offer appealing projects; those who were at the origin of the market are also going through changes. New challenges force us to follow best practices — and not solely in our sector but in other fields as well.

By Kairzhan Kudyarov, Chairman of the Board, Unistream

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