The cost of cross-border payments needs to drop

FOR MOST of human history, sending money across borders has cost the earth. Thankfully for globetrotters and e-shoppers in the rich world, that has changed in the past decade. A shift from cash and travellers’ cheques towards digital payments has cut the cost of moving funds around. And a new generation of fintech firms has broken the stranglehold that big banks used to have on money transfers (see article). As a result, fees have fallen. The cost of a transfer between consumers or small firms who are both in G7 countries can now cost 2% or less. This year some $10trn will pass across borders. As prices fall further, the sums will grow.

Yet one corner of this industry remains trapped in a dusty time warp: remittances, or the practice of foreign workers sending money to relatives back home. There the costs are still sky high, at about 7%. That matters. The sums involved are vast—$550bn of remittances will go to developing countries this year, more than all the capital they receive as investment from multinational companies, says the World Bank. There are 266m migrants who often send money home. Many of them are poor, and so are almost all their relatives.