It is expensive to be poor. Case in point, if you don’t have access to a bank account and need to send money to a friend or family in a different location, often your only choice is an expensive cash wiring service. Last year the World Bank found that the average cost of remittance services worldwide was 9 percent.

Well, these rates could be changing quicker than anticipated. On the heels of rumors that Facebook is preparing to offer money transfer services, it was officially announced that Walmart will be offering cash transfers for customers between stores, and doing so at their famous Walmart prices.

Say what you will about Walmart, it is hard to dispute that they know how to lower prices. At least initially, they will provide cash transfer services at significantly cheaper rates than most money transfer service providers. For instance, to send $900 between Walmart stores would only cost customers $9.50, a Walmart press release indicates. Transferring the same amount via Western Union would cost at least $52, according to their online price estimator, calibrated for my sending city of Boston.

Along with its low prices, Walmart thrives on its ability to attract customers with the ease and convenience of a one-stop shop. In 2012, it began offering its Bluebird reloadable prepaid cards, marketed as an alternative to checking and debit accounts.

This remittances news about Walmart raises interesting questions about what the future of the market might look like, as more non-traditional players including internet-based groups like Facebook and mobile service providers start offering money transfer.

Unlike with Walmart, the use of mobile service providers or internet-based applications to send money requires that users have a phone or internet access and the know-how and comfort to use these tools to transfer money. Mobile connectivity is widespread, and internet penetration is increasing rapidly, however, much room for improvement remains in mobile money uptake and in internet access. Also, neither of these remittance options provide the ease of cash entry and exit points, and the reality is that most of the world’s poor still operate in an informal, cash society. Walmart on the other hand has 10,957 retail units worldwide.

Though there is one huge shortcoming in Walmart’s new offering: for now, the transfer services are only available between stores in the United States.

Who will be next to join the list of remittances providers? McDonalds is in more than 100 countries, with more than 35,000 restaurants serving nearly 70 million people every day, many of whom might be ideal candidates for a cheap cash transfer service. Perhaps the day is nearing when you will send money to your grandmother in Bolivia or Tanzania while ordering up a Big Mac.

Image credit: Bloomberg/Getty Images

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Facebook to Provide Remittances? The News and the Bigger Picture

A few days ago news broke that Facebook, the social media giant with over a billion users worldwide, is making preparations to begin offering international money transfer services. Although the development has been dismissed by Facebook as rumor, the prospect of this enormous network enabled for money transfer and the huge global need for this service makes this a story worth following.

The news, initially shared by the Financial Times and sourced from individuals involved in the proceedings, indicates that Facebook is weeks away from securing regulatory approval from Ireland’s central bank to allow its users to store money on the site and use it to pay others. Facebook’s headquarters for Europe, the Middle East, and Asia is in Dublin. If approved, Facebook would be permitted to issue units of stored monetary value represented as “claims” against the company. Regulation in this area pertaining to Europe would allow approval in Ireland to green light services throughout the entire continent. The Financial Times also mentions that Facebook has had discussions about potential partnerships with several start-ups that offer international money transfer services through both smartphone and online platforms.

Facebook’s reach is massive, 1.23 billion at the end of last year, and it’s becoming increasingly diverse. Last week, thanks to increases in internet access and mobile penetration, the company achieved a milestone in India: 100 million users. Some analysts say by the end of this year India will surpass the United States (with 180 million) as the country with the most Facebook users. The social media site is big elsewhere in Asia, too. It is the most popular social network service in all but six of the region’s countries. After the US and India, Facebook’s largest countries by-users include Brazil, Indonesia, Mexico, Turkey, the United Kingdom, and the Philippines. Facebook has a large presence in Africa, as well, with 13 million users in Egypt, 9.4 million in South Africa, 5.3 million in Nigeria, 1.8 million in Kenya, and 1.4 million in Ghana.

Like Facebook, remittances volumes are increasing on the whole around the world. In a new brief on remittances and migration released last week by the World Bank, it’s shown that remittances to developing countries reached about $404 billion in 2013, an increase of 3.5 percent over 2012. Annual growth is expected to increase to an annual average of 8.4 percent over the next three years. In 2013, India received the most international remittances with $70 billion, followed by China with $60 billion, and the Philippines with $25 billion.

The world of remittances, once dominated by cash-to-cash money transfers, is increasingly going digital, through mobile money and online services. For example, long-time industry player Western Union experienced a 41 percent increase in online transactions in 2012. Along with such familiar market entities, mobile network operators, start-ups, and established internet companies (like Facebook) are entering the field. As we mentioned in a blog post earlier this week on M-Pesa expanding to Romania, M-Pesa offers international remittances, as do other mobile money outfits. Last week, in an encouraging act of cooperation, two mobile network operators announced a partnership enabling remittances between customers of the two services, which bridges a frequently-traveled remittance channel between the Ivory Coast and Burkina Faso. WorldRemit, an online-based start-up that allows money to be sent to the recipient’s phone, bank account, or designated pickup location, recently completed one of the largest Series A funding rounds (first round of early-stage funding) of any European financial technology business.

Whether or not Facebook decides to join these groups, the expansion of the market for sending remittances is good news for clients. In many countries, the total volume of remittances is greater than the total volume of exports. And the influx of additional players in the market is conducive to competition and lower prices. What’s more, electronic services are naturally more efficient, for both the provider and the client, than the brick-and-mortar-based equivalents. According to the World Bank, the average total cost of sending remittances fell in the first quarter of this year, decreasing below 8.4 percent, compared to its rate of about 9.0 percent last year. The average cost of remittances in Sub-Saharan Africa (SSA) remains an elevated 12 percent. In SSA, where mobile penetration is higher than banking penetration, mobile-based remittances are a clear opportunity.

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