The battle between digital and retail business models in the money transfer industry has intensified in recent years, and both sides have distinct advantages. However, the current trend shows digital business rapidly gaining ground, with some signs pointing towards it being the future winner.
To make a deeper analysis on the above 1st, we offer our readers, an overview of the key factors that determine who is winning and 2nd, a use case analysis of two specific businesses operating in each model.
Let’s start with the key factors:
1. Overall Growth and Market Share of the Remittance Market
Digital Business:
Money Transfer Operators (MTOs) are witnessing significant growth in digital platform reach across both developed and emerging markets, driven by factors like increased smartphone penetration, global shift to digital services, particularly among younger, tech-savvy consumers who prefer online and mobile app-based services and a surge in cross-border transactions.
- The global remittance market was valued at approximately $701 billion in 2020, with expectations to grow at a compound annual growth rate (CAGR) of 6% from 2021 to 2028.Digital remittances account for roughly $95 billion of global remittance flows, reflecting a rapid shift toward digital transactions in both developed and emerging markets.
- In Developed Markets such as the North America and Europe digital remittance volumes dominate. In the U.S., around 30% of adults have used digital payment platforms for cross-border transfers, with digital remittance services growing at over 10% annually. In Europe, 80% of remittance transactions now occur via digital channels, and by 2023, over 75% of money transfer operators in the region had launched their own digital platforms.
- Emerging Markets are the fastest-growing regions for digital remittance adoption. In fact, in Sub-Saharan Africa, where mobile money services have penetrated over 60% of the adult population in countries like Kenya and Ghana, digital remittance services saw a 20% increase year-over-year in 2022, and in Asia, countries such as India, and the Philippines, major remittance recipients, have integrated digital wallets and apps that streamline cross-border transfers, allowing up to 40% of incoming remittances to be processed through digital platforms.
By 2025, nearly 80% of global remittance transactions are projected to occur digitally, with emerging markets experiencing the highest growth rates. The increasing adoption of digital transfers is likely to bring a cumulative transaction volume of over $100 billion annually in digital remittances across Africa and Asia alone by 2030.
Retail Business:
Traditional retail-based money transfer services, still hold a significant share of the remittance market, even with the growing adoption of digital channels. This is particularly true among older generations and in regions where digital literacy is lower or digital infrastructure is lacking. Physical locations, especially for major MTOs like Western Union, MoneyGram, and Ria, continue to provide a critical infrastructure for customers who prefer in-person services, particularly in emerging markets where the population is unbanked or underbanked.
- The retail segment (physical locations, agents, and kiosks) still accounts for about 70% of the global remittance market in terms of transaction volume, despite the rise in digital channels. The retail remittance market is growing at a slower rate than digital, with a CAGR of around 3-5% expected through 2025.
- Physical locations generated approximately $400 billion in remittance transactions in 2022, compared to around $95 billion through digital-only channels. The total share of retail transactions is slowly decreasing as digital adoption grows, projected to drop to 60% by 2025. However, the absolute volume remains high, largely due to continued demand for cash-based transactions and personal interaction.
- In key regions such as Sub-Saharan Africa, South Asia, and Latin America, physical retail locations handle over 75% of remittances, especially in rural and underserved areas where banking infrastructure and digital literacy are limited. In countries like India, and the Philippines (some of the world’s largest remittance recipients), around 60-70% of incoming remittances are received in cash through physical locations.
In fact, about 80% of global remittance customers in emerging markets prefer cash-based transactions, with the highest reliance on cash in rural and underbanked regions and in developed markets, while digital transactions are popular, 30-40% of remittance transactions still occur through physical locations, often among immigrant populations who value the cash option or require assistance with the transfer process.
- Leading MTOs have extensive retail networks worldwide. For example, Western Union operates with over 500,000 agent locations globally, with a presence in 200+ countries; MoneyGram has about 350,000 retail locations in over 200 countries, with many in regions where digital channels are less accessible.; and Ria has a network of 490,000 locations worldwide, focused on markets where in-person transactions are preferred.
This retail footprint enables MTOs to reach customers in remote locations, maintaining significant coverage even in areas with limited digital connectivity.
While digital adoption is expected to reduce the share of retail transactions, the physical segment is likely to remain relevant, especially in emerging markets. Retail is expected to hold around 40-50% of the global remittance market by 2030. Therefore, MTOs are now blending digital and retail channels with hybrid models, enabling digital-initiated transfers that can be completed in cash at physical locations. This approach is popular in markets like Latin America and Southeast Asia, where digital adoption is growing but cash remains prevalent.
2. Cost and Pricing
Digital Business:
Digital platforms are generally 30-40% more cost-effective than traditional retail channels. This cost efficiency is partly due to reduced physical overhead and improved operational processes, making digital services particularly attractive to cost-conscious consumers.
At the same time, many digital MTOs, like Wise, maintain full fee transparency, attracting customers who prioritize knowing the exact costs upfront. In fact, 65% of digital remittance users cite transparent pricing as a primary reason for choosing digital MTOs.
Retail Business:
Traditional MTOs have higher operational costs due to physical infrastructure and agent fees, leading to 7-9% higher transaction costs on average compared to digital channels. Transparency is more challenging for retail MTOs, where exchange rates and additional fees breakdown are not always disclosed, relying instead on bundled fees that include exchange markups and service charges. Fees and exchange rates can also vary depending on the location and the agent, leading to less transparency.
3. Convenience, Speed and Accessibility
Digital Business:
- Digital platforms offer the convenience of sending money anytime, anywhere through mobile apps or websites. They focus heavily on user experience, offering features like 24/7 customer support via chatbots, multilingual interfaces, and personalized exchange rate notifications. 75% of digital MTO users cite ease of use as a key factor for choosing digital services. This is a significant advantage in today’s fast-paced world.
- As internet penetration increases, even in remote areas, digital money transfers become more accessible to a broader audience.
- Over 90% of digital MTOs offer real-time or same-day transfers, thanks to innovations like direct bank transfers, mobile wallets, and blockchain technology. This speed is especially important in markets like Latin America, where over 70% of digital remittances are completed within an hour.
- Mobile apps are central to digital remittance services. In 2023, 85% of digital remittance users used mobile apps to send money, with penetration highest in North America, Europe, and Southeast Asia. App-based MTOs like Remitly report over 50% of transactions happening entirely through mobile.
Retail Business:
- Retail locations offer face-to-face interactions, which some customers prefer, especially when dealing with financial transactions. This can build trust, particularly among those unfamiliar with or skeptical of digital services.
- While some traditional MTOs, like Western Union, have made strides in customer service innovation (e.g., multilingual support, hybrid digital-retail models), in-person services inherently limit flexibility. Retail MTOs are less agile in responding to user experience demands, with 55% of retail users indicating they would prefer faster transaction processing if available.
- Retail locations are crucial for individuals who operate in cash economies, providing a physical point of contact for money transfers.
- Traditional transactions often take 1-3 days depending on the region and cash availability at pickup locations. Despite improvements, retail MTOs generally cannot match the speed of digital transactions due to the need for physical handling and agent availability.
- Despite of the fact that retail MTOs are increasingly developing mobile apps, only 25% of retail MTO customers actively use these apps, often due to limited digital literacy and preference for in-person interaction.
4. Customer Demographics
The customer demographics for digital versus retail money transfer operators (MTOs) vary significantly, shaped by factors like age, geographic location, income level, digital access, and financial literacy.
| Key Stats and Geographic Insights |
Digital MTO Business Model Users |
Retail MTO Business Model Users |
| Age Demographics |
~65% of the users are under 35. |
The majority is 36+ age group, with 50% over age 40. |
| Geographic Distribution |
~75% live in urban or semi-urban areas, where internet access and smartphone penetration are higher. |
~60% of retail transactions happen outside of the major metropolitan regions with limited internet connectivity, lower digital literacy, and a preference for cash transactions. |
| Income Levels and Occupation |
+70% have higher income, greater access to bank accounts, smartphones, and have digital literacy.
Include professionals or skilled laborers (IT workers, healthcare professionals, corporate employees). |
Usually lower-income brackets, relying on cash-based services due to limited access to banking infrastructure.
Include unskilled or semi-skilled workers and migrant laborers. |
| Gender Distribution |
Overall ~60% are male.
In North America and Europe, gender distribution is more balanced, with men and women nearly equally using digital remittance services. |
Higher proportion of female users, especially in regions where women may have less access to digital tools. In Sub-Saharan Africa and South Asia, women represent up to 55% of retail MTO customers. |
| Digital Literacy and Education Level |
60-70% of users hold at least a secondary education and higher digital literacy rates.
In developed regions,~90% of digital MTO users are comfortable navigating online or app-based interfaces |
Over 50% of the users lack access to secondary education in emerging markets.
This group often has low comfort levels with digital platforms, contributing to their preference for in-person assistance with transactions. |
| Transaction Amounts and Frequency |
Typically remit larger amounts less frequently.
The average transaction size for digital remittances can range from $500 to $1,000. |
Often send smaller amounts ($200-$300 per transaction) but more frequently, especially among migrant laborers and seasonal workers. |
Based on the above, if we would have to summarize the characteristics of digital and retail businesses users’, we would say that Digital MTO users are predominantly younger, urban, middle to high-income, digitally literate customers, often remitting larger amounts less frequently, while Retail MTOs are typically older, rural or semi-urban, lower-income, less digitally literate customers, often remitting smaller amounts but more frequently.
These demographics highlight how MTOs need to cater to distinct needs across both digital and retail channels to serve their diverse user bases effectively.
5. Adaptability and Innovation
Adaptability and innovation in the money transfer operator (MTO) industry have been significantly shaped by the shift toward digital platforms, with digital MTOs quickly adopting new technologies, customer-centric features, and streamlined processes. In contrast, traditional retail MTOs, while evolving, have had a slower adaptation rate due to entrenched infrastructure and reliance on physical channels.
Digital Business:
Nearly 80% of digital MTOs have adopted new technologies like AI, machine learning, and blockchain to enhance user experience and security. For instance:
- Ripple and several other MTOs use blockchain technology to reduce transaction time and costs, leading to an average transaction fee reduction of 2-3%.
- Digital MTOs such as PayPal’s Xoom and Remitly have integrated with mobile wallets in regions like Africa and Asia, enabling 50-60% faster transaction completion.
At the same time, approximately 60% of the leading digital MTOs operate in an omni-channel mode, enabling digital initiation with cash pickup or vice versa, which broadens their market reach, particularly in regions where cash is still prevalent.
Retail Business:
For the Retail business, innovation adoption is slower, largely due to their dependence on established physical infrastructure, but increasing. Around 30-40% of retail MTOs have integrated some digital components, like mobile app interfaces or hybrid models, showing increased adaptability to digital trends while maintaining their traditional cash-based infrastructure. This is the case for some of the major retail players like Western Union and MoneyGram.
6. Security and Regulatory Environment
Digital Business:
Digital MTOs face complex regulatory environments, especially when expanding into new countries. However, many are successfully navigating these challenges by working closely with regulators and investing significantly in compliance technologies, including 80% of digital MTOs using AI and machine learning for anti-money laundering (AML) and fraud detection. This not only improves security but also boosts customer trust.
Retail Business:
Compliance innovations are slower in retail due to higher reliance on physical verification and documentation. Retail MTOs have a higher incidence of in-person verification processes, which are sometimes perceived as less convenient compared to digital KYC (know your customer) processes. On the other side, Retail MTOs have longstanding relationships with regulators and are well-versed in navigating compliance requirements in multiple jurisdictions. However, these regulations can also limit their flexibility.
Now that we have outlined the factors playing a key role in determining the winner of the battle between digital and retail business models in the money transfer industry, let’s focus on two of its most successful use cases. For the purpose at hands, let’s use the same KPIs we have used before, namely, growth and market share, cost and pricing, convenience and accessibility, customer demographics, adaptability and innovation, and regulatory environment.
- Growth and Market Share
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- Digital MTO:
- Growth: Has shown rapid growth, with a revenue increase of over 40% year-on-year in recent years. In 2022, the company’s revenue was approximately $653 million.
- Aggressive Expansion: This MTO is aggressively expanding into new markets and launching new products, including a recent focus on financial services beyond remittances, such as banking products for migrants.
- Market Share: Operates in over 170 countries and is a leading digital MTO in the U.S., holding an estimated 3-5% share of the global remittance market, but this share is growing due to its strong focus on digital channels.
- Primary Markets: This MTO is a global player with operations in over 135 countries with a strong presence in key markets such as the US, Latin America, Southeast Asia, Africa and Europe.
- Retail MTO:
- Growth: This MTO has seen consistent growth in revenue, though its scale is smaller than the one from its counterpart. It’s known for being more focused on maintaining profitability and steady revenue through its established customer base and agent network rather than aggressive expansion, which may make it a more stable but slower-growing business.
It primarily focuses on serving immigrant communities in the U.S. sending remittances to Latin America and the Caribbean.
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- Conservative Expansion: This MTO tends to expand more conservatively, focusing on strengthening its existing corridors and ensuring profitability.
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- Market Share: Holds a smaller global market share, but it is strong in certain corridors, especially between the U.S. and Latin American countries. It is considered a leader among U.S. based MTOs serving the Latin American region.
- Primary Markets: This MTO has a strong focus on the Americas, particularly the US-to-LATAM corridors. It also offers services in more than 35 countries worldwide but has a more regional concentration.
- Cost and Pricing
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- Digital MTO:
- Transaction Fees: The fees vary based on transaction speed, destination country, and transfer amount. Express transfers (instant) are higher-cost, while economy transfers (3-5 days) are more affordable. Fees can range from $3.99 to $6.99, with higher fees for faster transfers.
- Exchange Rates: Applies a markup on exchange rates, generally around 1-2% above the mid-market rate, which is competitive compared to traditional MTOs but higher than low-cost digital MTOs.
- Retail MTO:
- Transaction Fees: The fees are competitive, often starting as low as $2.99, and vary by country and transfer method (bank deposit, cash pickup, or mobile wallet). Fees are generally lower for cash pickups in certain Latin American countries.
- Exchange Rates: Typically applies a markup on exchange rates, around 1-2% above the mid-market rate, which again is quite competitive.
- Convenience, Speed and Accessibility
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- Digital MTO:
- Digital-First Approach: This MTO is primarily a digital platform, catering to the growing demand for online and mobile money transfers. This approach has allowed it to scale rapidly in markets with high smartphone and internet penetration.
- Payout Options: Offers diverse payout options, including bank deposits, cash pickups, and mobile wallets in many countries, which enhances accessibility for recipients.
- Retail MTO:
- Retail-First Approach: This MTO operates through a network of agents and retail partners. This model allows to cater those preferring traditional methods.
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- Payout Options: Offers bank deposits, cash pickups, and mobile wallet options, particularly focused on cash accessibility in Latin American countries.
- Customer Demographics
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- Demographics: Its customers are largely immigrant populations in the U.S., Europe, and Canada, sending money to family in Asia, Latin America, and Africa.
- User Profile: Its typical user base is young to middle-aged (25-45 years), tech-savvy, and comfortable with digital platforms. The company reports high engagement with its mobile app, particularly among younger users.
- Rapid Growth: As of 2021, reported having 2.4 million active customers, with strong growth year-over-year driven by its expansion into new markets and increased digital adoption.
- Retail MTO:
- Demographics: Serves primarily Hispanic and Latin American immigrant communities in the U.S., who send money to family in Latin America and the Caribbean.
- User Profile: This MTO has a loyal customer base, particularly among migrants who prefer in-person transactions or who have been using traditional remittance methods for years.
- Steady Growth: While this MTO may not be growing as rapidly as its digital counterpart, it benefits from a stable customer base that relies on its established network of physical agents and partnerships.
- Adaptability and Innovation
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- Digital Innovations: This MTO invested heavily in mobile technology and app-based transfers, focusing on digital-native features such as real-time tracking, delivery notifications, and multi-language customer support.
- Innovation Focus: Uses machine learning for risk management and fraud detection, enhancing transaction security and customer trust. It continues to heavily invest in technology to enhance its platform, improving customer experience, and expanding its service offerings.
- Retail MTO:
- Traditional Model: This MTO is about physical transfer methods, adapting well to its customer base by offering in-person cash pickups.
- Technology Use: Despite not being tech-centric, this MTO improved their real-time tracking and security features.
- Security and Regulatory Environment
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- Digital MTO:
- Compliance: It is regulated in the U.S. by the Consumer Financial Protection Bureau (CFPB) and adheres to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. In Europe, it follows the EU’s Second Payment Services Directive (PSD2).
- Licensing: Holds money transmitter licenses in multiple U.S. states and is registered with relevant financial authorities in countries where it operates.
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- Retail MTO:
- Compliance: It complies with U.S. federal and state regulations, with a strong focus on AML and KYC procedures, particularly for cross-border transactions to Latin America.
- Licensing: It holds licenses in the U.S. and operates under regulatory frameworks for money transfer services in all relevant jurisdictions, with a particular focus on meeting compliance for high-risk corridors.
So, who do you think is winning this business model battle?
What the provided use cases have shown is that, despite the fact that retail money transfer services are still holding a significant position nowadays, especially in areas where digital infrastructure is lacking or among populations that prefer cash transactions, digital model businesses are winning in terms of digital growth, global reach, and customer acquisition.
The digital model is better positioned to capitalize on the growing trend toward digital remittances, particularly among younger, tech-savvy users and in regions with high smartphone penetration. At the same time, it is increasingly positioning itself as the winner in the long term, with an expected growth at 15% CAGR due to the convenience, lower costs, and accessibility of digital platforms driving a shift in consumer behavior. While the expected growth for retail models is at a slower rate of 3-5% CAGR, with increased emphasis on hybrid models to remain competitive, while maintaining services for traditional, cash-reliant customers.
Both sides face distinct challenges and opportunities. The ultimate “winner” will depend on how well each side can adapt to changing consumer preferences, technological advancements, and regulatory environments. For now, digital is on the rise, but retail still plays a crucial role in serving specific markets and demographics.
If you are an MTO wanting to expand your reach, contact us at Prepay Nation. We may help you on that!
