The future of remittances in Latin America

It’s impossible to understate the importance of remittance payments for the LATAM region.

World Bank figures show that inbound remittances for Latin America totalled nearly $150 billion in 2022, and the largest remittance pipeline in the world runs from the US to Mexico. In 2023, more than $61 billion passed along this corridor, according to GlobalData research, with a further $18 billion flowing from the US to Guatemala.

For many people in LATAM, remittance payments are a lifeline that helps households to buy basic necessities, fund education for children, and protect themselves from economic shocks and political instability. According to the Inter-American Development Bank, remittances helped to lift 2.2 million Mexican people out of poverty that year.

In many countries in the region, remittances make up a substantial proportion of GDP – as much as 26.9% in Honduras, and 24.3% in El Salvador. Historically, these types of payments were processed on paper and could take long periods of time to clear. There's plenty of evidence to show that remittance flows in LATAM are becoming more digital and mobile, utilising platforms such as PayPal, but there are still big challenges to overcome.

For one, a huge proportion of the population in many LATAM countries are unbanked. Figures from The World Bank for 2021, show that more than 120 million people in the LATAM region don't have access to traditional banking services.

Many of these people may lack any official form of ID and high levels of fraud mean that there is still a great deal of uncertainty that many remittance payments actually reach their intended recipient. Fees for sending money can also be high and unfavourable exchange rates can also add to the expense.

Solving remittance pain points in Latin America

Remittance has been an area dominated by established banks and large money transfer agencies for many years. But this is changing; new players like Wise and Remitly are pioneering new business models with revised cost structures, clear pricing and quick processing times.

Innovative fintech companies such as these are in a position to help solve these issues in the LATAM remittances sector. There’s a massive opportunity to make cross-border payments easier, safer, cheaper and faster, boosting financial inclusion and helping developing countries to grow their economy.

And some institutions have already made their move. Revolut was granted a Mexican banking licence in 2024, while Nu Mexico, part of Brazilian fintech company Nubank, has partnered with remittance firm Felix Pago to facilitate cross-border payments from the US to Mexico.

There are further developments that are likely to open up new opportunities for other innovative institutions to help address remittance challenges in Latin America. As we've reported in the past, government-backed digital currencies (CBDCs) and stablecoins represent the next frontier in the evolution of remittances. However, confidence in CBDC among central bankers looks to be in decline, while Mexico’s CBDC project appears to have stalled for now.

In Mexico, cash is still king, accounting for more than three-quarters of overall transaction volumes in 2024 according to GlobalData. But the government and Banco de Mexico are keen to promote digital payments, and the growth of digital-only banks is driving debit card adoption in the country too.

What’s particularly interesting for remittance players looking at the Mexican market is the fact that prepaid cards grew by nearly 10% CAGR between 2020 and 2024, and the number of these cards – as well as transaction value – is projected to keep growing.

If you'd like to find out more about remittances and how they are evolving, download The Remittance Revolution: How to Win in Cross-Border Money Movement report.

How Paymentology can help remittance providers in LATAM

Paymentology is a global processor with true worldwide reach, and is well established in Latin America. We’re fully operational in Mexico, Brazil and the Caribbean, powering large regional clients.

Paymentology is also able to process payments in Antigua, Bahamas, Barbados, Colombia, Curacao, Dominican Republic, El Salvador, Haiti, Jamaica, Panama, Peru, Puerto Rico and Saint Lucia.

We have a fully-staffed team across Latin America, offering customer support.

If you want to find out more about how Paymentology can help your institution power remittances and other payment services in Latin America, get in touch today.