Mastercard has released a white paper on remittances in Latin America, highlighting the region’s growing remittance rates, fueled by increasing mobile phone and internet penetration. The transition from cash to digital options is expected to accelerate due to these factors.
As of 2022, Latin America receives a significant share of the global remittance flow, with one in ten people worldwide living in a home that receives remittances totaling $831 billion. The average cost of sending remittances to Latin America stands at 5.8%, slightly lower than the global average of 6.3%, with costs occasionally reaching as high as 25.5% in the poorest regions.
Digital remittances are gaining traction in Latin America, representing 43% of total remittances, compared to the global average of 52%. The report forecasts digital remittances to reach $20 billion by 2026. MoneyGram and Stellar facilitate remittances using USDC, while SBI Remit utilizes Ripple. Ripple is also at the forefront of developing applications for central bank digital currencies.
Despite the presence of crypto players like Binance and Mastercard, regulatory, trust, and technological adoption issues hinder their progress in the Latin American market. Additionally, current digitization efforts focus solely on the remittance transaction itself, neglecting broader digital money ecosystems necessary for reducing costs and enabling digital payments.
The report emphasizes the importance of partnerships between various stakeholders in the remittance ecosystem to overcome existing challenges and foster comprehensive digitization efforts. Such partnerships are essential for ensuring that recipients can fully utilize digital payments and access financial services beyond receiving remittances.
In conclusion, the intelligent weaving of partnerships among diverse players is crucial for advancing the digital remittance landscape in Latin America.
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