The remittance market is currently valued at $802billion, with the potential to reach $1.2trillion by 2030. Digital channels are at the centre of this vast market opportunity as they provide faster transfers, a better user experience, more transparency, improved customer service and much more.
Remitly is a digital financial services/remittances provider for immigrants and their families. It believes that immigrants typically face expensive or misleading financial services, designed to take a disproportionately high share of their profits.
Recently, Remitly conducted a survey of its customer base and found that despite nearly eight in 10 customers experiencing negative financial changes in the last 12 months (due to inflation, increase in rent/mortgage, medical costs, and more) very few said they were likely to send less money (six per cent) or less frequently (seven per cent) – demonstrating the incredible resilience and determination they have to provide for their families overseas.
Matt Oppenheimer has spent the better part of a decade working to make financial services better for immigrants and their families. As CEO and co-founder of Remitly, Oppenheimer discussed the economic impact that immigrants have on local and global communities, and why the financial industry must make progress in providing better, more affordable financial service for them:
How fintech can increase access to financial services for immigrants
Immigrants have a substantial 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 overseas economies.
In 2022, the global formal remittance market was valued at approximately $802billion. By 2030 it is estimated to reach $1.2trillion, registering a compound annual growth rate of greater than five per cent. To contextualise the size and importance of this market, according to the United Nations, global 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 centre of this vast 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 spending power to immigrants worldwide.
With digital remittances leading the charge in this market, it’s time for the fintech industry at large to rise to the challenge and think bigger. Fintechs have the opportunity to catalyse change by creating inclusive financial technology that supports immigrants in a truly impactful way.
Immigrant’s impact on economies
Worldwide, there are more than 280 million immigrants, including 44.9 million in the United States alone–greater than the population of the state of California. It is no surprise then, 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, where the economy would greatly struggle to grow without it.
Contributions to Capital
Research from FWD.us found that increasing annual immigration would increase US GDP from $20.94trillion (current GDP) to $47trillion (in today’s dollars) by 2050. Another study published by UCLA a found that the United States could add $1.5trillion to the economy and $367billion in federal and state tax revenue if we provided citizenship to all unauthorised immigrant workers who reside here.
This would increase the GDP per capita and consequently increase the standard of living for all Americans. According to a 2017 National Academies of Sciences, Engineering and Medicine report, second-generation immigrants are among the strongest fiscal and economic contributors in the US.
There is endless research showing that the prosperity of immigrants reverberates to the communities of the country where they reside. On the flip side, a reduction in immigration would hinder economic growth, according to the sameresearch study by FWD.us.
Contributions to Labor
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 workers’ ratio to retirees, bolstering Social Security benefits.
When it comes to job creation, a study, co-authored by an MIT economist, found that, per capita, immigrants are about 80 per cent more likely to found a company compared to US-born citizens; and those companies, on average, have about one per cent more employees than companies founded by US natives. It’s also worth noting that four out of the seven top public companieshave immigrant CEOs.
Contributions to Culture
Feeling nostalgic for their home countries that are often thousands of miles away, immigrants find comfort in their new homes through cultural pursuits. At the same time, natural-born citizens appreciate and benefit from the vibrancy 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 regarded as a top US foodie destination, with many of its most cherished dining experiences founded or inspired by immigrants. The award-winning restaurant, Guelaguetza was opened by immigrant founders Fernando Lopez and Maria Monterrubio, and offers eager customers a range of authentic Oaxacan cuisine. Renowned eateryParks BBQ, located in the heart of Koreatown, is owned by Jenne Kim, an immigrant from Seoul, whose roots inspire her cooking.
On the opposite coast, New York City, one of the most culturally diverse cities in the US, hosts upwards of 60 million visitors each year; one of the main attractions being its dynamic art scene which has an ever-growing number of immigrant influencers. A report from the Center for an Urban Future revealed that between the years 1990 and 2020, the number of immigrant artists in the city increased 69 per cent to about 51,000 at the time of the report.
These are just a few examples of many which demonstrate the influence and importance of the cultural contributions immigrants share with the world.
Fintechs building and developing products should do so with immigrants in mind. They should create inclusive products and services that account for the needs of this diverse group of people–not only 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 grappled with economic turbulence resulting in increased unemployment rates, supply chain disruptions, product shortages, and escalating inflation to name a few.
Although the turmoil has impacted everyone on a large scale, it has had adisproportionately larger impact on immigrants. Facing financial hardship while still maintaining the required level of support for their families back home, often means immigrants must cut back on their personal spending, and leads them to take on new work and increase their working hours.
It’s important to understand that remittances have historically proven to be resilient in times of financial crisis because of their non-discretionary function and the unwavering commitment of immigrants to their loved ones. So, during times of financial difficulty, immigrants not only feel the impact on their personal circumstances, but they carry the additional responsibility of ensuring continued monetary support for overseas families who depend on them.
The unique opportunity of the fintech industry
The fintech industry has the unique opportunity to create inclusive solutions that positively impact the immigrant community. The opportunity exists because technology promotes 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 technology and rise to the occasion.
Legacy players in the space use antiquated technology which bottlenecks customer-centric solutions and change. Fintechs on the other hand, given their digital-first roots, have a head start 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 mindsets, 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 shift to digital, we predict fintechs will continue to lead on innovation in financial services.
Call to fintech players
Immigrants are crucial to the economy. However, they have been unable to take full advantage of the current financial industry. A primary reason is that the massive economic impact this diverse group of individuals has on their residing communities often goes unnoticed, and, as a matter of course, the economic impact on them also goes unnoticed.
So, what makes the most significant difference in supporting this historically underserved community? Financial services.
Traditionally, immigrants have faced expensive and/or misleading financial services. Notably, these services have taken a disproportionately high percentage of their profits. This makes the stakes for financial services much higher for immigrants with family members in low-income countries because they use these funds for basic living necessities like housing, food, and clothing.
Still, the resilience and dedication of immigrants to their families are unwavering, despite how countercyclical it can be to their lives. The financial services industry should take a page out of this playbook and return the great favour to them that they have given to us.
Fintechs building and developing products should do so with immigrants in mind. They should create inclusive products and services that account for the needs of this diverse group of people–not only for the benefit of global economies but because it’s simply the right thing to do.
