Innovating Cross-Border Remittances in Latin America through Receiver-Led Money Transfers

Remittances are more than just money transfers—they are sometimes a lifeline for millions of families across Latin America and the Caribbean. According to the latest available information from the World Bank, Latin America and the Caribbean received an estimated $156 billion in remittances, marking a 2.3% increase from the previous year.¹ These inflows remain vital to the region’s economies, accounting for over 20% of GDP in countries such as Honduras, El Salvador, and Haiti.¹ These funds may pay for essentials like food, housing, education, and healthcare, while also supporting small business investments and community development.

Yet despite their importance, remittance flows remain burdened by inefficiencies. Traditional channels often involve cash-heavy processes, multiple intermediaries, unpredictable delivery times, and opaque fees that can erode the value of each transfer. With both senders and receivers demanding more speed, affordability, and transparency, the time for change is now.

The Opportunity: Empower the receiver to initiate the remittance transaction

The remittance market is ripe for innovation—particularly in Latin America. Several factors point toward a major opportunity for receiver-led remittance models:

• High bank account penetration among U.S. senders: According to the Federal Deposit Insurance Corporation (FDIC), as of 2022 over 94% of U.S. households have a bank account.² This means most remittance senders already hold funds in a digital form, ready to be transferred electronically without relying on cash agents.
• Latin America as a receiving region: The World Bank identifies Latin America as one of the top global remittance-receiving regions, with the United States serving as the primary sending country.
• Receivers play a pivotal role in determining how remittances are sent: A study by the Center for Financial Inclusion referencing the World Bank household survey data, found that in many key corridors—including the United States to Latin America—over half of remittance recipients are the primary decision makers in choosing the provider and payout channel. This influence is especially strong in markets where recipients have established banking relationships or use mobile wallets regularly.^1,3

This combination—banked senders, a highly dependent receiving region, and receiver influence—presents a compelling case for empowering receiving banks to initiate transactions.

How the receiver-led remittance works with Visa Direct

In traditional cross-border transfers, the sender initiates the payment through a remittance service provider or bank, and the funds pass through a chain of intermediaries before reaching the recipient. Each of these steps can introduce delays, fees, and risks.

Visa Direct can help flip this model:

• Instead of the sender pushing funds through multiple hoops, the receiving bank “pulls” the funds directly from the sender’s account via Visa’s network. This Visa Direct transaction is called Account Funding Transaction, or “AFT”.
• The process is secure, and leverages Visa’s global reach—covering over 195 countries and territories and more than 150 currencies.
• The receiving bank gains control over the transaction, from initiation to settlement, while the sender authorizes the request.

Sending money abroad has never been easier! Let’s illustrate with a simple example:

• Maria, in Honduras, needs $300 from her son Pedro in the U.S.
• With just a few taps on her bank’s mobile app, Maria sends Pedro a secure payment link.
• Pedro enters his Visa card details, clicks “Send”, and—within moments—the money is in Maria’s account.

Fast. Simple. Secure.

Why this matters for Latin America

A receiver-led model powered by Visa Direct AFTs can offer three critical benefits for Latin American remittances:

1. Faster Delivery
   Speed is a top priority for remittance users. The World Bank’s Remittance Prices Worldwide database shows that the share of remittances delivered in under an hour has grown from 39% in 2013 to over 52% in 2023.¹ Families increasingly expect instant or same-day transfers, especially for urgent needs.
   
   By enabling direct account-to-account pulls through Visa Direct, banks can deliver funds to the receiver in minutes rather than the traditional 3-5 business days.⁴
2. Lower Costs
   Cost remains a major pain point for remittance users. In Q4 2023, the average cost of sending $200 to Latin America was about 4.2% of the amount being sent for digital transfers, compared to 6% for cash-based transactions.⁵
   
   By enabling a fully digital process from initiation to payout, Visa Direct may help mitigate operational overhead, allowing receiving banks to offer competitive pricing.
3. Full Transparency and Trust
   Transparency is a key factor in driving remittance adoption and customer trust. According to the World Bank’s Remittance Prices Worldwide report, providers that disclose the full cost of a transfer—including fees and exchange rate margins—upfront, consistently attract higher transaction volumes and retain more customers compared to those with hidden charges or unclear delivery times.⁵ Visa Direct’s Account Funding Transaction flows can replicate this transparency.

Implementation Playbook for Latin American Banks

For financial institutions looking to modernize their remittance offerings, a receiver-led remittances request strategy can be deployed in a few key steps:

1. Launch a “Request Money” feature: Empower recipients to initiate transfers directly, aligning with their influence over provider choice.
2. Default to account payout: Make bank account deposit the primary option, with wallet credit or regulated cash-out as alternatives for underserved users—those who are not currently using bank offerings.
3. Be radically transparent: Show a single, final fee with guaranteed FX rates and delivery times before the sender approves the transfer.
4. Leverage built-in compliance tools: Visa Direct provides embedded fraud detection and complements the bank’s anti-money laundering (AML) screening and sanctions checks, helping to reduce operational complexity.

Why now?

The conditions for change are ideal:

• Banked senders: With over 94% of U.S. households holding bank accounts, the infrastructure for digital initiation is already in Latin America.²
• Digital adoption: Smartphone penetration in Latin America has surpassed 70%, and mobile banking usage is growing rapidly.⁶
• Consumer expectations: The pandemic accelerated demand for instant, transparent, and affordable money movement.

In short, Latin American receiving banks are uniquely positioned to lead the next wave of remittance innovation. By adopting receiver-led flows with Visa Direct, banks can deliver a remittance experience that is potentially faster, cheaper, and more transparent than legacy models.

For banks and fintechs in Latin America, the opportunity is clear. By putting recipients in control and leveraging Visa Direct’s Account Funding Transactions, you can help:

• Reduce costs for your customers
• Deliver funds in minutes
• Build trust through transparency
• Expand your reach across high-value corridors

It’s time to make every remittance dollar go further

Lead the transformation. Adopt a receiver-led remittance strategy and unlock a new era of cross-border payments for Latin America’s families.