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The debilitating cost of remittances
Dilip Ratha knows how hard it is to work abroad and send money home. Why? Because he had to go through the same hoops when he was a migrant.
It's the inconvenience and the cost, the World Bank's head of KNOMAD and lead economist says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
Still, Ratha points out, these flows are a lifeline for millions of poor families around the world. And they keep the lights on in remittance-dependent economies like El Salvador or Lebanon.
With an average 6% commission, the amount lost each year is double all the aid that the US gives to the entire world or what sub-Saharan Africa gets.
Lowering costs of poverty with digital & economic access
By the end of the decade, 70% of all new value in the global economy will come from digitally enabled businesses. The pandemic accelerated a push toward digitalization, especially in developing nations, yet nearly 4 billion people are still offline, and 1.4 billion don't have a bank account.
Expanding access to digital tools for individuals and small businesses is a no-brainer, but easier said than done. So, what can we do to expand digital trade further, come up with fairer and safer remittances and digital payments, and push to include everyone in tomorrow's digital-first economy?
To get some answers, GZERO hosted in partnership with Visa the livestream conversation "Closing the Gap: Digital Tools for Economic Empowerment," moderated by JJ Ramberg, co-founder of Goodpods and former host of MSNBC's Your Business.
Rubén Salazar, global head of Visa Direct, underscored how digital decency has become more acute in the post-pandemic world, yet many systems — for instance, payroll — remain analog. He also explained why unbanked people live in a vicious cycle of hardship because they can only operate in cash and lamented why cash-only networks make remittance fees so high — even as the UN goal wants to set a global 3% limit by 2030.
Ali Wyne, senior analyst for global macro-geopolitics at Eurasia Group, discussed how the discrepancy of having 1.7 billion people now cut off from the direction of travel of the global economy creates both an urgent imperative to go digital and an opportunity to narrow the gap. The likely geopolitical fallout from all of this happening after COVID and the food and energy crisis made worse by the war in Ukraine? Waves of political unrest that'll topple governments.
Dilip Ratha, head of KNOMAD and lead economist at the World Bank, shared his personal story of sending remittances to his family when he was still a student in the US. That's how he learned why it's so hard for migrants to send money back home — a lifeline for their families and remittance-dependent economies around the world.
Kati Suominen, founder and CEO of digital tech firm Nextrade Group, extolled the virtuous cycle of digital payments and access, which helps everyone the same way lack of it holds up all of us. She singled out paperless customs and logistics tech improvements as a major COVID silver lining for digital trade and offered her take on why — when they go digital — women-led small businesses often perform those led by men.
Usman Ahmed, head of global public affairs and strategic research at PayPal, offered some striking figures on what happens to small businesses when they embrace digital: sales triple by selling online, and quadruple by selling across borders. Does he see any downsides to a cashless economy? Nope, especially when it comes to the digital services created around it, but Ahmed recognized that unbanked people face tough challenges to ditch cash.
Watch live October 19: Can access to digital tools transform the world's economy?
Is digitization crucial to economic growth? GZERO Media is partnering with Visa to explore what it means when 70% of the global economy’s growth in the next decade is projected to come from digitally-enabled businesses – yet 3.7 billion people lack internet access. What are the tools and initiatives needed to bring more people into the digital economy?
Live on Wednesday, October 19, our expert panel will explore the impact of digitization on empowering consumers and small businesses. Please register to attend.
Participants:
- JJ Ramberg, Co-Founder, Goodpods, and former host of MSNBC's Your Business (moderator)
- Usman Ahmed, Head of Global Public Affairs and Strategic Research at PayPal Inc.
- Dilip Ratha, Head of KNOMAD and Lead Economist at the World Bank
- Ruben Salazar, Global Head of Visa Direct
- Kati Suominen, Founder and CEO, Nextrade Group
- Ali Wyne, Senior Analyst, Global Macro-Geopolitics, Eurasia Group