Digital tools are critical for boosting financial inclusion and cross-border connectivity.
Last year, the World Bank ticked off the third consecutive all-time high for international remittances. Despite global COVID-19 lockdowns ending less than two years ago, global remittances rose 3 per cent over the previous year to about US$860 billion in 2023. And a huge source of these came from Asian workers.
Millions of workers across Southeast Asia send money to their families and loved ones daily, with anticipated transaction value reaching US$8.07 billion by 2028. Forecasted to grow at an annual rate of 7.20 per cent, digital remittances have played a pivotal role in shaping national economies, most notably in the Philippines where they account for 2.2 per cent of gross domestic product (GDP).
As a vital source of foreign capital, it is in every nation and business’s interest to facilitate easier management and transfer of international remittances. Historically, this would have involved long queues at brokers such as Western Union. However, thanks to emerging financial technology (fintech) players and digital access, sending money has become easier and quicker for workers from SEA.
Nevertheless, a significant number of workers in SEA and abroad remain unbanked and reliant on the cash economy, especially in markets such as Vietnam. This presents a huge wealth of untapped opportunities to help SEA workers reap the benefits of digital finance and remittances.
A US$1 trillion opportunity
SEA’s digital growth is one of its biggest success stories of the last decade. The region now boasts 460 million young, tech-savvy consumers and a digital market likely to reach US$1 trillion in value by 2030.
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The COVID-19 pandemic dramatically increased digital inclusion within SEA, with 40 million people across Singapore, Malaysia, Indonesia, the Philippines, Vietnam and Thailand coming online for the first time in 2021. Today, the number of digital consumers in SEA stands at 460 million while Smartphone penetration among internet users ranged from 98.8 per cent in Thailand to a low of 81.7 per cent in the Philippines in 2022.
Amid this incredible digital growth is a rapid acceleration in the use of digital and smartphone payment platforms. Digital payments via eWallets totalled US$22 billion in 2019 and are forecasted to surpass US$114 billion by 2025.
Prominent eWallet providers such as GCash in the Philippines and TrueMoney in Thailand have incorporated remittance-specific services into their offerings. Even Grab, which has evolved from a ridesharing service to a multi-purpose application, is touting future Grab Wallet transfers between SEA nations. The surging popularity of these digital wallets is a driving force behind the expansion of digital remittance services in SEA, but they are currently only scraping the surface of the region’s potential.
Given the number of unbanked workers in SEA and the rapid innovation in FinTech, there is an unparalleled opportunity to allow more people to reap the benefits of migrant work. However, better access to digital remittances necessitates good interoperability between banks and financial providers across SEA.
Regional cross-border payment interoperability has made strides in SEA over the last year. In June, a new regional cross-border payment system was launched, allowing residents of Malaysia, Thailand and Singapore to pay for goods overseas using a QR code. Part of this scheme includes setting up an ecosystem to better support remittance payments and other economic activities.
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The more banks, financial institutions and Fintech applications work towards creating pan-ASEAN interoperability, the better equipped they will be to capitalise on the region’s remittance economy.
The benefits to workers cannot be understated. Instead of days, relatives and other recipients can receive funds in seconds rather than days. The cost of sending will become cheaper; users will be able to send more money and view in real-time the journey of their funds.
Meanwhile, by emphasising cross-border real-time payments, local currencies’ usage is promoted, fostering financial resilience and advancing regional economic integration, ultimately contributing to the cohesion and stability of ASEAN as a unified entity.
Looking ahead, ongoing innovation and technological advancements have created a positive outlook for digital remittances in SEA. Financial and technology players that look to capitalise on this potential can be optimistic, with enhanced convenience and accessibility looking promising for individuals and businesses alike.
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