Digital Remittances: The Role of Alternative Money Transfer Channels

This chapter explores the role of digital financial services, e.g., mobile money systems and cryptocurrency-based systems, for migrants to send remittances. We discuss whether digital remittance channels increase access to financial services for remittance-sending and remittance-receiving households. Africa, and in particular Kenya, are pioneers in digital money transfer systems; thus, our chapter focuses on Kenya, however taking into account other experiences of the Global South. We find that digital remittance channels are often superior in terms of service-related features. However, the choice to use a specific transfer channel might be restricted by the lack of physical and technological availability of providers, means, and technological illiteracy. In addition, sending and receiving households might be cautious to use mobile cash systems due to a lack of trust in the system, the providers, or regulatory authorities. Accordingly, financial inclusion beyond e-payments and outreach to the poor is not automatic. In contrast, the use of Bitcoin-based transfer systems is more ambivalent; these systems are technically more challenging in terms of both infrastructure and literacy and more vulnerable to fraud. Some findings also indicate that Bitcoin is an incomplete and inferior substitute to other digital remittance channels.