Courage Needed to Build Payment Ecosystem That Turns Remittances into Development Power

Behind every remittance lies a story of sacrifice by millions of migrant workers who leave their families to earn a better living. Remittances have often been viewed narrowly as merely money sent to meet daily needs: paying school fees, renovating houses, buying basic necessities, or helping parents in the home village. This view is not entirely wrong, but it is too narrow. Economically, remittances are one of the most stable sources of development financing and the most resilient to global shocks. The World Bank estimates that global remittance flows reached in 2024, with approximately flowing to low- and middle-income countries. This value has surpassed foreign direct investment (FDI) and official development assistance (ODA) in many developing countries. When foreign capital flows easily in and out due to market turmoil and geopolitical uncertainty, remittances continue to flow, driven by family ties and real living needs. Countries such as India, Mexico, the Philippines, Bangladesh, and Pakistan have proven that remittances can become a buffer for the national economy. India receives more than in remittances annually, making it one of the largest sources of foreign exchange. For years, the Philippines has utilised migrant worker remittances to support domestic consumption and balance of payments stability. Indonesia has no less potential. Millions of Indonesian migrant workers are employed in Malaysia, Singapore, Hong Kong, Taiwan, Japan, South Korea, and Middle Eastern countries. The funds they send support the education, health, housing, and consumption of millions of families across various regions. However, the potential of remittances as productive capital has not yet been optimised. Most of the funds are spent on consumption because our financial system has not been fully able to connect remittances with savings, investment, business credit, and insurance. Another often overlooked issue is the high cost of sending money. Although global remittance costs have fallen from over 9 per cent in 2009 to around 6 per cent today, this figure is still far more expensive than domestic transfers. Digital remittances average around 4 per cent, while cash-based services are still around 7 per cent. Yet, the Sustainable Development Goals (SDGs) target is to reduce remittance costs to below 3 per cent. This cost difference is not primarily due to technology, but rather to market structure and regulation. Cross-border payments still rely on correspondent banking networks, meaning transactions must pass through several intermediaries. Each link in the chain adds cost, slows the process, and increases risk.