What are cross-border payments?

The largest source of remittances to India (30.8%) is West Asian countries like the United Arab Emirates. Next up is North America (29.4%) and Europe (19.5%). The Indian state of Tamil Nadu has the most diverse mix of remittance sources due to extended Tamil communities overseas. The most significant remittances to Tamil Nadu originate from Malaysia, Singapore, and the United States (US).

Surprisingly, the world’s most populous country doesn’t receive the most in remittances. That’s because India boasts a larger diaspora population. Nonetheless, China gets most of its money from anglophone countries like the US, Australia, and Canada. In addition, the Chinese economy receives a large chunk of remittances from other Asian nations, such as Japan and South Korea.

Although Mexico also shares a border with Belize and Guatemala, it’s the border with America that’s most crucial to Mexico’s economy. That’s because most of the country’s remittances are sent by Mexican family members living in the US. So, in addition to supporting loved ones, remittance transactions have helped Mexico become Latin America’s second-largest economy.

Filipino migrants who send money home are regarded as modern-day heroes. Like Filipino National Heroes, remittances have “contributed to the quality of life and destiny of the nation”. If you’re looking for evidence, look no further than the coronavirus outbreak. Contrary to popular belief, overseas workers often send more money home during economic hardship. While the World Bank predicted a 20% dip in remittances in 2020, they only fell by 1.6%. Remittances to the Philippines only fell by 0.8%. Interestingly, of the tens of billions sent to the Philippines yearly, nearly half of this statistic comes from the US.

Remittances to many countries remained surprisingly stable in 2020 – but Egypt bucked the trend. That’s because remittances to the country increased by a record-setting 11% statistic. One explanation could be ex-pats living in the Gulf Cooperation Council (GCC) region. Comprising countries like Saudi Arabia and Kuwait, the GCC is the primary source of remittances to Egypt. Home to several million Egyptians, sending remittances from the GCC is significantly cheaper than from the Western world.

Since the start of the pandemic, remittance payments to Pakistan have continued to rise. Proactive measures by the government, like increased interest rates on savings, have encouraged ex-pats to send more home. According to the State Bank of Pakistan, the closure of international borders combined with Eid al-Fitr contributions has led to record remittance numbers. These statistics have been so impressive that even prime minister Imran Khan tweeted his thanks to the Pakistani diaspora.

France is a major remittance-sending country, especially to Africa. However, it’s also a big recipient of money from overseas. But how come? Let’s have a closer look. London is often spoken of as “the sixth biggest city in France”. That might seem nonsensical, but it makes sense when you consider that more French people (around 350,000) live in England’s capital than in Nice. Indeed, many French people leave their home country for pastures new. That includes other EU countries, the UK, and North America. Perhaps in anticipation of returning to France or helping loved ones, ex-pats continue sending remittances home.

Only India, Mexico and China have more citizens working overseas than Bangladesh. Remittances from over 10 million ex-pats and money from the garment industry are the key sources of inbound capital to Bangladesh. However, unlike money from exports, remittance systems are more evenly circulated across the country. Whereas most business profits get taxed and then reinvested, remittances are usually spent straight away.

Despite being a popular destination for immigration, about 4-5 million Germans (roughly the population of Berlin) live outside Germany. Consequently, it’s one of the largest sources of the diaspora in the Organisation for Economic Cooperation (OECD). Germans predominantly live in the US, France, the UK, the Netherlands, Switzerland, Italy, and Spain. But why? Primarily, most emigrants are well-educated and earn more abroad. A study by the University of Duisburg revealed that Germans overseas make, on average, €12,000 more than they do back home. While around 180,000 Germans emigrate every year, another 130,000 return. This annual repatriation could explain Germany’s high remittance transaction statistics.

Nigeria accounts for over a third of remittances to Sub-Saharan Africa. And since many transfers to Nigeria occur through informal channels, the actual statistic is probably higher. While most money originates from Nigerians in the UK and the US, neighbouring Cameroon is an often overlooked source. According to analysts, 70% of remittances are spent on consumables such as food and energy. The rest goes towards investments like housing and education.