The U.S. remittance industry is getting bigger – so where are the big banks?
- Foreign workers in the U.S. remit around $165 billion back home every year.
- Trailing in the adoption of technology, big banks have failed to serve the space well, and are losing ground to new fintech providers.
The U.S. is the most popular destination for the world’s migrants, who leave their origin countries in the hope of a better future. It’s home to 19% of the world’s total migrant population. In 2020, the U.S. recorded 27 million foreign-born workers, which made up 17% of the total workforce. These workers remit some $165 billion overseas. Yet, among the financial institutions servicing those transactions, an important group is missing: big American banks.
In a lot of cases, workers that arrive on American shores originate from middle to low-income countries, and the money they make there sustains their families at home — often supporting multiple households. With the advent of the Covid-19 pandemic and the consequent economic hardships, the World Bank projected the sharpest decline of global remittances in recent history. As things played out, however, the global remittances flow defied the projections, falling only 1.6% to $540 billion by the end of the year. In 2021, the flow continued upward, and remittances to low-and middle-income countries alone are projected to have grown by 7.3%, reaching $589 billion.
According to the World Bank, 2022 is set to see 4.4% remittance growth, mainly due to a weaker growth outlook for the United States.
In 2021, the top three remittance destination countries were India, China, and Mexico. For each of these three countries, the U.S. was the biggest source for remittances. Even beyond that, the U.S. is the most significant source country for remittances in the world. With the U.S. playing such a significant role in the global remittance market, and the big banks notably absent from the scene, who’s powering this market?
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