By Carlos Ordonez
Clear Junction
This year presents a pivotal moment for cross-border payments, as I believe the time is right to transform them through the power of blockchain technology. The good news is that global remittance flows continued their ascent in 2023, albeit at a slower pace, highlighting regional disparities and vulnerability to economic pressures. The bad news is that the existing challenges that impede global remittance flows—high fees, slow settlement times—became even more challenging in 2023, with economic headwinds like higher prices to contend with.
There's no doubt that remittances are a vital support that migrant workers provide for their recipient families back home. Remittance senders and recipients want speedy, secure settlements at a fair price.
Remittance businesses need technology and payment partners that can deliver the infrastructure, compliance expertise and strategic foresight to make these services more accessible. But good intentions need practical action if they are to deliver what consumers and businesses need from cross-border payments. That's why blockchain is a game-changer—a technology that can tackle the challenges that plague traditional systems.
Certain cross-border payments flows are shaping the landscape. And shifts taking place in remittance destinations and volumes are what's fascinating about the latest World Bank Migration and Development briefs at bit.ly/43VNIya and bit.ly/3vOIZSp.
In 2023, the United States continued to be the biggest transmitter, while the main countries receiving money were India, Mexico, China, the Philippines and Egypt. Overall, global remittance to low- and middle-income countries reached an estimated $669 billion, a rise of 3.8 percent from 2022, according to the World Bank. Contrary to expectations, remittance flows in Europe and Central Asia experienced a 1.4 percent dip in 2023 following an 18 percent surge in 2022, the World Bank found, noting that factors contributing to this include the conflict in Ukraine disrupting remittances from Russia, and economic contraction in key destination countries like Germany and the UK. Despite the decline, countries like Poland and Ukraine are still receiving substantial inflows, the World Bank affirmed.
Researchers also noted that South Asia exhibited the strongest remittance inflow growth of 3.8 percent in 2023, fueled by a surge in remittances to India, projected to reach $125 billion in 2023. Meanwhile, Latin America and the Caribbean experienced an 8 percent rise. As one of the largest remittance-receiving regions,
According to the World Bank, LATAM's resilience can be attributed to the strong labor market in the United States, the primary source of remittances, coupled with a depreciating U.S. dollar, making it cost-effective for migrants to send money back home. Countries like Mexico, Brazil and Colombia experienced significant growth, highlighting the vital role of remittances in their economies.
The Middle East and Africa witnessed a 2.7 percent decline in remittance inflows in 2023, the World Bank further noted, making it the only region experiencing a downturn. Contributing factors include an economic slowdown in Gulf Cooperation Council countries, political instability in some regions and depreciating currencies in several African countries. Egypt, a major recipient, saw a particularly sharp decline due to economic challenges.
World Bank researchers anticipate a smaller rise in remittances of around 3.1 percent compared to the previous years, which is due to a slower pace of economic activity. But the main challenge of the industry in 2024 remains unchanged from previous years: the high cost of cross-border payments. The World Bank's database shows that sending $200 across borders costs an average of 6.2 percent, with banks remaining the most expensive channel at 12.1 percent.
Sending money across borders can be slow, expensive, and unclear. However, in response to the limitations faced by traditional systems, blockchain technology emerges as a pivotal innovation. It offers a new and efficient approach to international money transfers, and according to a recent J.P. Morgan payments report (see bit.ly/49ujUtD) blockchain can eliminate many of the pain points afflicting current cross-border processes, such as:
We're now seeing major traditional financial institutions embracing blockchain. When big names like J.P. Morgan are actively exploring blockchain solutions for cross-border payments, other institutions are sure to follow and fuel blockchain adoption even more.
Another factor is the emergence of fintech-driven solutions. Innovative startups are leveraging blockchain to create faster, cheaper, and user-friendly cross-border payment platforms. These solutions, tailored to specific market segments, offer viable alternatives to traditional banks, injecting healthy competition into the industry. The momentum is expected to intensify in 2024, driving increased infrastructure development and industry-wide adoption.In tandem with this, we're also expecting to see more collaborations between traditional incumbents and nimble fintechs to solve interoperability issues and increased efforts towards standardized solutions. Collaboration between different platforms and protocols can facilitate seamless cross-border transactions, bolstering overall efficiency.
Cross-border payments players of every kind are now standing at a crossroads. Traditional players must adapt and embrace new technologies, while new entrants should prioritize security, user experience, and regulatory compliance. With increased infrastructure, more collaboration across platforms, and user-friendly solutions tailored to specific markets, we can unlock the full potential of blockchain and build a truly inclusive, efficient, and accessible ecosystem for sending money across borders. The year 2024 marks the first crucial steps towards realizing that potential and creating convenient cross-border payments for all. 
Carlos Ordonez is the Business Development Manager for Clear Junction, https://clearjunction.com, which was founded in 2016 by a team of financial experts dedicated to transforming the landscape of cross-border payments. Leveraging years of experience and a deep understanding of banking intricacies, the company's team has crafted a suite of payment solutions powered by proprietary technology, ensuring a seamless experience from start to finish. Now, with offices strategically located in the UK, Poland and Latvia, Clear Junction offers a comprehensive array of payment and treasury services for global financial entities. Carlos Ordonez can be reached at linkedin.com/in/carlos-ordonez-amador.
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