Finteching remittances in Paradise: a path to sustainable development

Remittances are an important source of external finance for developing countries, and especially for the Pacific small island developing States (Pacific SIDS). The transaction costs of sending remittances to these countries are amongst the highest in the world. Tackling this issue is crucial not only for economic and social development, but also for improving financial inclusion. This paper is one of the first to analyse fintech adoption in remittance services in the Pacific SIDS, using an original framework to assess the current landscape of fintech in the remittance sector and draw tailored policy recommendations. The framework is conceptualized through a ladder with five rungs: availability, accessibility, awareness, literacy and trust. Based on this, the paper systematically analyses the fintech landscape in the Pacific SIDS and finds that most of these dimensions are still not observed, which results in strong preference for the more expensive traditional remittance services. It finds that among all the fintech-based remittance services, mobile money is the most prevalent and more readily accessible to individuals in the Pacific. Countries in the region are different in their stage of readiness for fintech adoption. While Fiji, Samoa and Tonga have shown almost all of the necessary conditions for adopting fintech-based remittances, other countries still lack behind, requiring extra efforts to encourage the digital transformation of remittance services.