Remittances and Financial Inclusion Workshop July 18 2012, Sydney Carlo Corazza

1. The General Principles for International Remittance Services - General Overview in the Pacific Remittances and Financial Inclusion Workshop July 18 2012, Sydney Carlo Corazza Payment Systems Development Group Financial Infrastructure Service Line Financial Inclusion Global Practice World Bank

2. Top remittance recipients in 2011

3. Resilience of remittances across all regions Source: Migration and Remittances Unit, World Bank 3

4. Remittance flows to developing countries 4

5. Global Average and International MTO Index Remittance Prices Worldwide - Global Trends • In the First Quarter 2012 the total global average of sending USD 200 worldwide remained stagnant and decreased only from 9.30% to 9.12% from Q3 2011 • A similar trend was observed for the International Money Transfer Operator (MTO) Index, which includes all the MTOs that are present in over 85 percent of the RPW corridors. 5

6. Remittance Prices WorldwideRemittance Sending Countries (Q1, 2012) Global Average Q1, 2012 9.12% Global Average Q3, 2011 9.30% • Note: high volatility of foreign exchange rates against the US Dollar may result in higher costs 6

7. Remittance Prices Worldwide Remittance Costs Trend by Region (2008 – Q1 2012) • SA showed a significant cost increase from Q3 2011 to Q2 2012 • Remittance costs in all regions, except ECA, have come down from 2008 • However, the Global remittance costs still lack a drastic reduction • Most regions have experienced significant fluctuations of remittance costs • The recent financial crisis and regional crises appear to have negatively affected remittance costs 7

8. Remittances as % of GDP and Remittance Costs in Receiving Countries in the East Asia and Pacific Region • Remittances costs to Malaysia, Philippines, and Indonesia are the lowest among the EAP countries • Remittances costs to Pacific Islands tend to be high • EAP as a whole showed a semi-annual cost reduction of 5.4% • However, Fiji and Vanuatu showed significant yearly cost reduction (-20.57% and -21.97% respectively) • Samoa had a semi-annual cost increase of 23.93% while Fiji had a cost decrease of -18.29% 8

9. World Bank – CPSS General Principles for International Remittances Services GP1: The market for remittances should be transparent and have adequate consumer protection GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the remittance service industry GP5: Remittance services should be supported by appropriate governance and risk management practices Remittance Service Providers Should participate actively in the application of the general principles Public Authorities Should evaluate what action to take to achieve the public policy objectives through implementation of the general principles 9

10. World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific • GP1: The market for remittances should be transparent and have adequate consumer protection • Transparency is still limited for consumers and RSPs are not providing adequate information to migrants • Authorities have adopted effective initiatives in this area and they have showed their effects in terms of price reduction • When it comes to financial services and remittances, consumer protection is not yet fully guaranteed across most of the countries

11. World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific • GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged • Receiving countries lack of supportive payment systems infrastructure that would facilitate smoother processing of the transactions • Cash is still largely predominant both in sending and receiving countries • Retail payment systems strategies of authorities and industry, in both receiving and sending countries, have not included remittances as a relevant topic

12. World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific • GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework • Remittances are often regulated through an array of different law and regulations, under the umbrella of various authorities • Compliance with AML/CFT regulation might represent the most relevant variable of the internal costs of the RSPs • Authorities should strive to balance the risk posed by the remittances business with the compliance requirements and avoid over-regulation

13. World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific • GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the remittance service industry • Sending and receiving markets experience different concentration of operators in the market • Anti-competitive agreement are in place, but the most relevant effects are on the sending side, where the level of concentration is sensibly higher • There is a tendency to restricting MTOs access to the payment systems infrastructure, which could lead in the long term to relevant problems of further limitation of competition

14. World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific • GP5: Remittance services should be supported by appropriate governance and risk management practices • In the region there is a general adequate level of compliance with corporate governance principles • Risk management is in place and there are no indications of major shortfalls in this area • Constant attention should be dedicated to the risks of fraud and the consequence in terms of consumer protection and reputation of the whole industry

15. Thank you! ccorazza@worldbank.org 15