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Thorsten Beck, Mathilde Janfils, and Mr. Kangni R Kpodar
This paper uses data across 365 corridors to document time and country variation in remittance fees and explore factors predicting variation in remittance fees. We document a general reduction in such fees over the past decade although the goal of fees below 3 percent has not been met yet in many corridors. We identify both cost- and risk-based constraints and market structure as barriers to lower remittance fees. Higher transaction costs as result of a more rural population in the sending country and lower scale are associated with higher remittance fees. However, lower risks due to the stability of fixed exchange rates and Internet rather than cash payment are associated with lower remittance fees. Finally, remittance corridors dominated by banks and few players are characterized by higher fees.
Thorsten Beck, Mathilde Janfils, and Mr. Kangni R Kpodar

. This paper uses data for up to 365 corridors from 2011 to 2020 to document development of remittance fees over time and across corridors and to explore the factors that explain variation in remittance prices across corridors. We rely on the World Bank’s Remittance Prices Worldwide database, which provides detailed cost analysis on the product level. Considering data for 2020, we find variation between 1 and 25 percent for a 200 USD remittance across corridors, but also significant variation across corridors for the same sending and the same receiving country. Over

Julia Bersch, Jean François Clevy, Naseem Muhammad, Mrs. Esther Perez Ruiz, and Mr. Yorbol Yakhshilikov
This paper analyzes the potential for fintech to facilitate cheaper and more efficient remittances, and to enhance financial inclusion in Central America. Digital remittances remain nascent in the region, primarily reflecting behavioral inertia, small cost advantages of digital over traditional channels, and inadequate financial literacy. Through expanded alliances between traditional and fintech operators, digital remittances can further reduce transaction costs and reach those remote, low-income households in a timely and secure manner. A meaningful expansion of fintech remittances necessitates an enabling regulatory environment for digital financial services, and KYC and AML/CFT requirements proportionate to the value of transfers.
Thorsten Beck, Mathilde Janfils, and Mr. Kangni R Kpodar

Copyright Page © 2022 International Monetary Fund WP/22/63 IMF Working Paper Strategy, Policy and Review Department What Explains Remittance Fees? Panel Evidence Prepared by Thorsten Beck, Mathilde Janfils and Kangni Kpodar * Authorized for distribution by Johannes Wiegand April 2022 IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate . The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its

Julia Bersch, Jean François Clevy, Naseem Muhammad, Mrs. Esther Perez Ruiz, and Mr. Yorbol Yakhshilikov

: jbersch@imf.org ; jclevyaguilar@imf.org ; muhammad.naseem@etu.uca.fr ; eperezruiz@imf.org ; yyakhshilikov@imf.org ; Contents ABSTRACT I. EXECUTIVE SUMMARY II. INTRODUCTION III. WHAT ARE FINTECH REMITTANCES? IV. U.S. TO CA REMITTANCES CORRIDOR: STYLIZED FACTS A. Operators B. Modes of Transfer C. Remittances Costs V. EMPIRICAL ANALYSIS OF REMITTANCE FEES’ DRIVERS VI. REMITTANCES AND FINANCIAL INCLUSION IN CA VII. REMITTANCES DIGITALIZATION IN CA: COUNTRY CASE STUDIES A. Remittances Digitalization: Supply, Demand, and Regulatory

Dilip Ratha

hard to save enough to send remittances. Can high transaction costs be cut? Transaction costs are not usually an issue for large remittances (made for the purpose of trade, investment, or aid), because, as a percentage of the principal amount, they tend to be small, and major international banks are eager to offer competitive services for large-value remittances. But in the case of smaller remittances—under $200, say, which is often typical for poor migrants—remittance fees can be as high as 10-15 percent of the principal (see table). Cutting transaction

Julia Bersch, Jean François Clevy, Naseem Muhammad, Mrs. Esther Perez Ruiz, and Mr. Yorbol Yakhshilikov

transfer to CA was the second lowest worldwide behind South Asia. Nonetheless, average remittance fees remained above the Sustainable Development Goal (SDG) of US$6 (for a US$200 transfer) in all CA countries. The evidence suggests that greater competition could further decrease remittances fees. Remittance-recipient CA countries are already having a glimpse at fintech opportunities. The transformation to the industry has so far been more parsimonious than groundbreaking, involving mutually beneficial alliances between traditional and new operators. Such alliances are

Tito Nícias Teixeira da Silva Filho

20. Remittance Costs and Economies of Scale 21. Remittance Costs and Market Competition 22. Difference in Remittance Costs Among Different Type of Providers 23. Remittance Costs: Corresponding Banking Relationships 24. Average Cost of Remittances: Fee and FX Margin 25. Remittance Costs and the Exchange Rate Regime Tables 1. Average Remittances Cost: Sending x Receiving Country 2. Remittance Costs Transparency: FX Margin Appendix Figures A2. The CBRs Network Has Become More Concentrated A2. Countries Most Affected by The Loss of Correspondent

International Monetary Fund

in fees in the US–Mexico corridor, where remittance fees fell more than 50 percent from over $26 (to send $300) in 1999 to about $12 in 2005, and have leveled off since then at around 5 percent for $200 in the first half of 2017. Some commercial banks provide free remittance services, hoping to attract customers for their deposit and loan products. And in some countries, new remittance tools—based on cell phones, smart cards, or the Internet—have emerged. Third, nonexclusive partnerships between providers and existing postal and other retail networks would help