The remittance industry is solving the wrong problem

I. The thesis

Twenty years ago, sending a hundred dollars from Paris to Dakar cost the sender between twelve and fifteen dollars. Today it costs under three. The remittance industry is rightly proud of this. Wise, MoneyGram, Stellar, Yellow Card, Strike, and a long list of stablecoin-rail providers have driven the unit cost of cross-border transfer toward zero, and the World Bank's Remittance Prices Worldwide database tracks this progress with quarterly precision.[^1]

This is real. It is also beside the point.

The cost of *sending* money home has fallen by roughly seventy-five per cent in two decades. The cost of *borrowing* against money already sent home has not fallen at all. A Nigerian doctor in Manchester who sends twenty thousand pounds to her family every year over a decade has transferred two hundred thousand pounds. If she wishes to borrow against the property those transfers financed, she will be quoted twenty to twenty-eight per cent per annum by a Nigerian commercial bank.[^2] If she chooses the subsidised federal route, she can access nine per cent — but only under specific eligibility conditions and only for housing within four designated cities.[^3]

The industry has solved the transfer leg of the diaspora's financial life. It has not solved the credit leg. And the credit leg is where the economic value sits.

II. The evidence

Consider the numbers. The World Bank estimates that low- and middle-income countries received six hundred fifty-six billion dollars in formal remittances in 2023, with a further 2.3 per cent growth projected through 2024.[^4] On the standard reading, this is a transfer problem: get the money home faster, cheaper, more transparently. The industry has organised itself around this reading for a generation.

But look at what happens to the money once it arrives. IFAD and OECD surveys consistently find that more than forty per cent of remittance flows are deployed into real estate, family businesses, or informal lending to relatives.[^5] Not into bank deposits. Not into local investment products. Into capital assets, paid for in cash, with no leverage attached.

This is the misallocation. A diaspora family that buys a property cash, for sixty thousand euros, has invested sixty thousand euros of capital. The same family, with access to credit at ten per cent against eighty per cent of property value, could deploy three hundred thousand euros of capital — five times the asset base, generating five times the return, with the same household cash outflow.

The remittance industry has not even attempted to address this. Its product roadmap, looked at honestly, consists of: faster transfers, cheaper transfers, easier transfers, more compliant transfers. The leveraged financing of productive assets in source countries — the thing that would actually scale the economic impact of remittances by an order of magnitude — does not appear on the roadmap of any of the major remittance players.

Why? Two reasons, both structural.

The first is regulatory perimeter. Wise, MoneyGram, and their stablecoin equivalents operate under payments licences, not banking licences. A payments licence permits transfer; it does not permit lending. Lending requires either a banking licence, an alternative investment fund licence, or an equivalent. The capital, governance, and regulatory burdens are very different. The remittance industry has organised itself precisely *not* to be in the credit business.

The second is institutional posture. Banks, which do have lending licences, do not lend to the diaspora because the cross-border underwriting problem — verifying income in one jurisdiction, taking collateral in another, hedging foreign-exchange exposure between the two — is uneconomic at the unit-ticket sizes the diaspora generates. The Federal Mortgage Bank of Nigeria can do it because it is a federal mortgage bank backed by a sovereign housing fund. Attijariwafa, Bank of Africa BMCE, and the Banque Centrale Populaire can do it for Moroccan nationals because the Moroccan state has built infrastructure to facilitate it.[^6] Neither structure exists for the typical diaspora corridor.

The result is a market split into two halves: a transfer market that is highly competitive, low-margin, and rapidly maturing; and a credit market that is essentially absent, where the diaspora is left with the worst possible product — informal family lending, or commercial-bank rates that make leverage economically irrational.

III. The counter

The strongest objection to this thesis is that the remittance industry is right to stay out of credit. Lending across borders is hard. Underwriting non-resident borrowers is hard. Foreign-exchange hedging is expensive. Capital controls are real. The track record of cross-border consumer lending, in regions including parts of Latin America and Sub-Saharan Africa, is poor. The industry's choice to focus on transfer, the argument goes, is rational risk management.

This objection deserves a serious answer.

It is correct that the historical track record is poor. It is also correct that the structural difficulties — KYC, foreign-exchange hedging, enforcement — are real. But the argument elides the change in the underlying infrastructure. Three things are now different from when the historical track record was being established.

The first is the legal recognition of stablecoins as financial instruments in the European Union under the Markets in Crypto-Assets regulation, which came into force in 2024.[^7] A stablecoin is now, in a regulated jurisdiction, a recognised asset that can be held as collateral, accounted for on a balance sheet, and pledged against credit. This was not true five years ago.

The second is the maturation of the Alternative Investment Fund framework under AIFMD II, which permits the constitution of private credit funds with cross-border passporting rights and which is now an established channel for non-bank credit at scale.[^8] The European private-credit market has grown from under five hundred billion euros in 2020 to well over a trillion in 2025. The infrastructure to operate as a non-bank lender in Europe is no longer the unproven thing it was in 2018.

The third is the operational maturity of regulated custody for digital assets. Swissquote Bank Europe, Sygnum Bank, Hauck Aufhäuser Lampe, and other depositary banks in Luxembourg and Switzerland now offer FINMA- or CSSF-supervised custody of stablecoin balances as a standard product line. The custody question — which used to be the central operational risk in any stablecoin-backed structure — is now an off-the-shelf service.

The objection that credit-across-borders is hard is therefore not wrong. It is dated. The infrastructure to do it under regulated conditions did not exist when the diaspora-credit failures of the 2010s were tried. It exists now. The question is no longer whether the structure is feasible. It is whether the institutions building it will do so under appropriate regulatory frameworks, or whether the space will be ceded to less rigorous operators.

IV. The takeaway

For a diaspora reader, the practical implication is direct. The financial product that matters most over the next decade is no longer cheaper remittance. It is regulated credit, denominated in a currency of choice, secured against an asset the borrower already holds.

For a policy reader, the implication is that the regulatory frameworks now in place — MiCA, AIFMD II, the Luxembourg RAIF regime — collectively create the legal infrastructure for a category of cross-border consumer credit that did not previously exist. The question facing supervisors in source-country jurisdictions is whether to engage with this infrastructure proactively, or to wait until it is built around them.

For an industry reader, the implication is that the remittance market, as a stand-alone product category, is approaching its end-state. Margins are thin. Differentiation is operational. The next ten years of value creation in cross-border financial services will not come from continuing to compress the cost of transfer. It will come from building the credit layer that the transfer industry has, for entirely understandable reasons, never built.

The diaspora has organised its economic life around an industry that solves the wrong problem. The right problem is now solvable. The institutions that recognise this first will define the standards under which the next category forms.

*The Nova Letter N°02 will be published next Sunday at 17:00 GMT.* *Topic: Stablecoin holders are not waiting for banks to onboard them. They are building parallel collateral systems.*