Mastercard‘s recent white paper highlights the growing importance of blockchain and crypto in reshaping the remittance landscape in Latin America.
The financial services giant points to increasing remittance rates outpacing global averages and the pivotal role of mobile technology and internet access in transitioning from cash-based systems to digital solutions.
Key Insights and Statistics
The paper reveals that remittances are a lifeline for one in ten people globally, with a total volume reaching $831 billion in 2022.
Latin America, in particular, benefits from relatively lower average remittance costs at 5.8%, compared to the global average of 6.3%, despite some regions facing fees as high as 25.5%.
Despite the cost advantages, a significant portion of remittances still moves through informal channels, with at least half bypassing formal financial systems, according to World Bank data.
The Digital Remittance Landscape
Digital transactions are becoming increasingly prevalent, with 43% of remittances in Latin America received digitally, trailing slightly behind the global average of 52%.
The value of digital remittances in the region is expected to hit $20 billion by 2026, underscoring the sector’s growth potential.
Notable collaborations, such as MoneyGram and Stellar’s use of USDC and SBI Remit’s partnership with Ripple, demonstrate the evolving infrastructure for digital remittances.
Ripple’s involvement in central bank digital currency (CBDC) initiatives highlights the broadening scope of blockchain applications in the financial sector.
Challenges and Opportunities
While blockchain and crypto offer new avenues for remittance flows, the sector faces hurdles related to trust, regulatory compliance, and technological adoption.
Mastercard’s analysis suggests that for digital remittances to fully realize their potential, it is crucial to develop digital money ecosystems in recipient countries, ensuring that funds received digitally can be spent with the same ease.
The Role of Partnerships
Mastercard stresses the importance of forging strategic partnerships among a diverse array of players in the remittance space.
Collaborations between fintech firms, blockchain platforms, and traditional financial institutions are key to creating a more efficient, accessible, and cost-effective remittance ecosystem.
With projects like MoneyGram’s use of USDC and Mastercard’s own partnership with wallet provider Belo, the path forward involves leveraging blockchain technology to streamline remittances while addressing the broader needs of the digital money landscape in Latin America.
Mastercard’s report concludes that a concerted effort to weave intelligent partnerships will be pivotal in transforming the remittance industry for the better.
