Technology | Media | Telecommunications

Friday, April 30, 2021

How Instant Payments Impact Global Money Transfers

The COVID-19 pandemic has been a growth driver for the transformation of remittance services, partly due to the closure of traditional money transfer agent locations as part of numerous national market lockdowns.

Many of the major domestic and international remittance providers -- both those with physical branches and agent networks -- and digital-only players have posted significant growth in their online customer base during 2020.

In contrast, consumer cash transactions fell sharply in 2020. Although there may be a return to cash-use post-pandemic, digital remittance use will likely become a permanent trend in customer behavior.

Online Instant Payments Market Development

According to the latest worldwide market study by Juniper Research, digital domestic money transfer transaction values will rise from $2 trillion in 2020 to $3.4 trillion in 2025 -- driven in part by the rapid growth of mobile money transfers.

Mobile transactions will represent an 89 percent share of total global transaction value by 2025, with drivers of volume growth being peer-to-peer (P2P) payment applications in developed markets and mobile money in emerging markets.

The research findings identified that to compete in a congested online payments market, mobile money transfer apps must leverage instant payment capabilities to ensure the best user experience.


The new global market study found that services such as Venmo and Zelle have propelled mobile apps to dominance in domestic money transfers.

The research also identified that conversational platforms, such as WhatsApp, are poised for growth, with the successful launch of its mobile payment feature in India and the recent green light for the roll-out of its payment solution in Brazil.

Juniper analysts recommend that money transfer vendors develop the social elements of their software apps, in order to combat the increased competition from conversational commerce providers.

This latest study has uncovered that with shifting customer expectations, existing money transfer models face an increasing threat from instant payments, with domestic instant payment transaction values forecast to grow from $524 billion in 2020 to reach $2 trillion in 2025.

According to the Juniper assessment, instant payments can significantly increase transaction speed and reduce cost, compared with digital wallet and app-based solutions, and therefore pose a significant threat to the monetization models of established P2P payment options which levy fees for fast transfers.

"It is critical for money transfer players to create user-friendly app experiences around their new instant payment capabilities to ensure that they fully leverage the benefits, and that they remain relevant in this rapidly advancing market," said Susannah Hampton, senior analyst at Juniper Research.

Outlook for Instant Payment Applications Growth

With the steady growth of digital-only remittance providers, established industry players -- such as Western Union and MoneyGram -- have been forced to invest heavily in online service offerings. However, due to the continued disruption from the pandemic, they've struggled to drive consistent top-line growth.

I believe that the traditional consumer payments and money transfer markets will continue to evolve as more fintech startups dislodge the prior influence of legacy service providers. It's inevitable that the incumbents that failed to react quickly to the apparent market trends will suffer the consequences of their delayed reaction.