Remittances have been constantly evolving throughout centuries. In this post, we aim to shed some light on the evolution of remittances from the Hawala system to digital remittances and the 4 reasons why they are important in today’s globally connected world.
Development of Remittances
1- Financial Inclusion is critical for poverty reduction and economic growth
2- Lower cost of remittances is the focus of many stakeholders
3- Consumers are now demanding full disclosure and transparency
4- Send remittances safely, whenever, and wherever
Purpl will democratize remittances for the Lebanese
Development of Remittances
Remittances started as something known as the Hawala System in the 8th century. According to the Corporate Finance Institute, the Hawala system first originated in India in the 8th century and it was an informal method of transferring money without physical money actually being moved from one place to another.
In 1872, the first funds were moved via wire using a telegraph. According to the Payments Journal, a telegram sent from the sender’s office confirmed that the money had been deposited, the superintendent would then send another telegram to the recipient’s office to authorize the payment.
One hundred years later, in 1973, SWIFT was founded and went live in 1977. According to SWIFT, 518 institutions from 22 different countries were connected to SWIFT messaging services and during the first 12 months of operation, they processed a total of 10 million messages.
In 1998, Paypal, another game changer, stepped into the spotlight of money transfer. Paypal enabled online money transfers and at a fraction of the cost that was charged by traditional companies and banks. Ever since, the fintech industry has been booming at an unprecedented pace aiming to transform the industry as digital and as user-centric as possible.
So what are the benefits provided by the innovation of the remittance and fintech industry?
1 – Financial inclusion is critical for poverty reduction and economic growth
For traditional bank-to-bank remittance, both the sender and the receiver need to have a bank account. Though this might not seem like an issue for the sender in developed countries, in receiving underdeveloped countries most of the population depending on remittances are unbanked. According to the World Bank, in the last decade, 1.2 billion previously unbanked adults now have access to financial services, and the unbanked population fell by 35% due to mobile money accounts. Giving the unbanked access to basic financial services is critical for poverty reduction and economic growth.
2 – Lower cost of remittances is the focus of many stakeholders
With the booming online money transfer services, initiatives started emerging focusing on decreasing the average cost of international remittances. Reducing the cost of remittances is one of the targets of 2030 Sustainable Development Goals developed by the UN. According to GSMA, a survey conducted on mobile money remittance costs revealed that the cost of sending remittances from mobile to mobile is lower than the global average by almost 44%. It is also estimated that digital remittances can eventually reduce the cost of sending remittances to under 3%.
3 – Consumers are now demanding full disclosure and transparency
There are several fees associated with remittances. These fees include: charges to transfer a certain amount of money, exchange rates, the speed of transfer, and how the receiver is paid. When it comes to traditional remittance players, exchange rates are usually considered as hidden fees.Unfortunately, consumers are not always fully informed of all the fees, whether hidden or not, they will be paying to execute a transfer. With the lack of transparency, consumers find it difficult to compare prices and choose the option that fits them best. With the rise of fintech and digital remittances, consumers are requesting more transparency when it comes to remittances and money transfers. Digital remittance players are now responding to consumers’ demands and are providing the consumer with full disclosure of all the fees upfront with the total amount to be paid before executing the transaction. This is giving consumers the option to compare prices easily between different options available and picking the option that fits best.
“While traditional operators have launched digital solutions, they have yet to adopt transparent pricing of transfers. Unless operators accept this requirement, they will continue to lose market share. Innovation must be the number one priority.”
– Nick Maynard
4 – Send remittances safely, whenever, and wherever
Digital remittances allow people to send and receive remittances at their convenience and own time. Senders are now able to transfer money with just a few clicks on their mobile phones whenever and wherever they want. On the other hand, recipients are liberated from the opening hours of traditional remittance players.
Time and location convenience are not the only aspects ameliorated by remittances going digital. As per GSMA, account holders can now conduct transactions independently from the safety of their homes, and most importantly they can track their transactions efficiently.
Purpl will democratize remittances for the Lebanese
So what is the role of Purpl? With the deepened crisis that has hit Lebanon since 2019, the Lebanese people deserve an alternative solution to one of the most relied-on sources of income, remittances!
Purpl aims to provide an alternative access to basic financial services for the 1.5 million unbanked population and democratize the remittance to Lebanon to all the 20M Lebanese! With Purpl, the Lebanese will have access to all the benefits of digital remittances.
Purpl is built to make your everyday financial needs a breeze.
From lower fees, skipping long queues, no commission on cash out, full transparency and no hidden fees on transfers, to an overall seamless experience, Purpl is here to turn the tables!
“Purpl Me” is as easy as 1,2,3…
Written By: Mayssa Abillama
