It’s a beautiful summer evening in Little Village, also known as La Villita, a thriving Mexican-American community in Chicago. Roberto closes his bodega for the day and walks to his apartment. Once he gets home, he uses WhatsApp to video call his 70-year-old mother, Maria, who lives in his hometown of Morelia, in the Mexican state of Michoacan. Recently, Maria has been struggling with health issues, and she ran out of savings to pay for her much-needed medication. Roberto, who never shied away from his familial responsibilities, offers to send his mother $300 to cover the cost of the medication and additional medical checks at her local hospital. After the call, he logs into a digital remittance transmitter app he has been using since 2020 when the COVID-19 pandemic forced him to remain home for weeks. Within minutes, the transaction cleared successfully, with funds drawn from his bank account and deposited into a digital credit card that Maria would use the next day at the pharmacy, with help from her youngest daughter.
Roberto is no outlier – he is one of the millions of US Latinos who use remittance services frequently to support relatives and friends in their home countries. The World Bank and the Bank of International Settlements define international remittances as “(…) cross-border, person-to-person payments of relatively low value that are typically recurrent. These transactions are typically undertaken by migrant workers who send support payments to individuals residing in their country of origin.”[1]
In the last decade, international remittances have grown exponentially, becoming true lifelines for individual households and entire regional and national economies. For instance, in Central American countries such as El Salvador or Honduras, remittances currently represent over 25% of their GDP, constituting a critical flow of dollars that stabilize their economies and play a countercyclical role during downturns. This has been the case for many low to middle-income countries with significant emigration patterns to more developed economies. Mexico has not been an exception. While remittance flows are less prominent in relative terms (representing 6% of its GDP in 2023), they have reached whooping new heights, totaling over $63 B in 2023. With 96% of these remittances originating in the US, the US-Mexico remittances corridor has become the largest in the world.
While remittances have positively impacted the well-being of receiving households, including increased resilience to economic shocks and expanded investments in education and healthcare, the opportunities for broader financial inclusion of both remittance senders and receivers have yet to be fully leveraged. According to the 2023 Federal Deposit Insurance Corporation’s National Survey of Unbanked and Underbanked Households, 9.5% of US Latino households remained unbanked, more than twice the national rate of US unbanked households at 4.2%.[2] This represents over 1.3 million Latino households without access to formal financial services. The gaps are even more pronounced on the Mexican side, with only 49% of adults having at least one account at a financial institution, according to the Mexican National Institute of Statistics and Geography’s 2021 National Financial Inclusion Survey.[3]
For millions of unbanked households, remittances are the only contact point with the financial system. Already embedded in the habits of underserved individuals on both sides of the border, remittances can play a critical role in opening the door to additional financial services such as checking and savings accounts, credit, and insurance products. Additionally, remittances can have a crucial impact by expanding the breadth and depth of financial systems in receiving countries, setting the foundations for further financial inclusion.
While the roots of financial exclusion have been stubbornly hard to address, the recent acceleration of digitization trends in the remittance market represents a unique opportunity to increase access to financial services among underserved populations. Since the COVID-19 pandemic in early 2020, digitization has been the rule in most aspects of our daily lives, from virtual education to telehealth and telework. Remittances have not been the exception. In times when lockdowns made it harder to access brick-and-mortar service providers, the adoption of digital platforms ballooned. Quoting Mastercard’s latest report on digital remittances in Latin America, “In 2023, global digital remittances exceeded 50% of total market share for the first time in history, translating into US$439 billion in volume.”[4]
Digital remittances offer a series of benefits: increased competition, an opportunity to lower costs, reduced speed, and potentially more transparency and security. They also open the door to further customization of services to different market segments. However, challenges still persist: insufficient digital access and lack of trust among traditionally underserved communities limit the potential that these new technologies can offer.
In this context, the Aspen Institute Latinos & Society hosted two roundtable discussions in Washington, DC, that convened 50+ cross-sector leaders representing over 30 nonprofits, government agencies, think tanks, and companies to ponder the challenges and opportunities for financial inclusion as digitization in the remittance ecosystem unfolds. The goal of these conversations was to set the foundations of a roadmap for expanding accessible, cost-effective digital remittance services in the US and Mexico to accelerate the financial inclusion and well-being of unbanked and underbanked communities.
Widely renowned for its convening power, the Aspen Institute is uniquely positioned to lead this initiative. It provides a nonpartisan, unbiased platform to discuss some of the greatest challenges of our time and find common ground to realize a free, just, and equitable society. Additionally, since the foundation of Aspen Institute Mexico in 2014, the organization can leverage its presence on both sides of the border to facilitate an urgent conversation on a policy area with a broad impact on the bilateral relationship.
In the next few months, the Aspen Latinos team will continue to collaborate with a collective of cross-sector leaders in the remittance ecosystem to establish a series of principles that can further guide financial inclusion efforts in the industry, US public policy, and advocacy and literacy initiatives by community organizations. The goal is for these principles to become an actionable tool that can facilitate additional conversations and new partnerships to leverage the full potential of digital remittances for the financial empowerment of remittance senders and receivers.
However, this is only half the equation. Similar conversations and collaboration efforts will need to be promoted among key stakeholders in the Mexican ecosystem to establish a corresponding roadmap to advance the financial and economic well-being of remittance-receiving households.
We invite you to stay tuned for the next steps of this initiative and to reach out to our team with any comments, suggestions, or expressions of interest.
Aspen Latinos extends its gratitude to the Mastercard Center for Inclusive Growth and Prudential Financial for supporting this strategic initiative.
[1] Ardic, O., Baijal, H., Baudino, P., Boakye-Adjei, N. Y., Fishman, J., & Maikai, R. A. (2022, June). The journey so far: making cross-border remittances work for financial inclusion (FSI Insights on policy implementation No. 43). World Bank Group & Bank for International Settlements. https://www.bis.org/fsi/publ/insights43.htm
[2] Federal Deposit Insurance Corporation (FDIC), 2023 FDIC National Survey of Unbanked and Underbanked Households (November 2024). https://www.fdic.gov/household-survey/2023-fdic-national-survey-unbanked-and-underbanked-households-executive-summary
[3] Instituto Nacional de Estadística y Geografía (INEGI), Encuesta Nacional de Inclusión Financiera 2021 (2022) https://www.inegi.org.mx/contenidos/programas/enif/2021/doc/enif_2021_nota_tecnica.pdf
[4] Mastercard & Payments and Commerce Market Intelligence, The future of remittances in Latin America: Digitalization, multiple rails, and the strategic role of partnerships (2024). https://www.mastercard.com/news/media/ltfpfln3/pcmi_mastercard_the_future_of_remittances_
en_march2024.pdf