Summary :
Over the past decade, remittances to North African countries have significantly increased, rising from $17.7 billion in 2008 to $65 billion in 2023. These remittances are crucial for families and local economies in Algeria, Egypt, Morocco, and Tunisia. However, the costs associated with sending money remain high, with North African migrants paying an average of 6.08% for remittances from the EU, resulting in a total annual cost of nearly $4 billion. Neo-banks, with their lower fees and digital platforms, present an opportunity to reduce these costs and enhance financial inclusion for migrants.
North African migrants in the EU face compounded economic hardships due to inflation and geopolitical tensions, including the war in Ukraine and the COVID-19 pandemic. These challenges increase living costs and remittance fees, pushing many migrants towards riskier informal channels. While neo-banks offer lower fees and greater accessibility, their adoption is limited by barriers such as inadequate access to technology, low digital literacy, and regulatory challenges.
This study examined remittance trends and financial institution preferences among North African migrants in Europe and assesses neo-banks’ potential to foster financial inclusion and cost reductions. The main objective was to explore how neo-banks can alleviate economic pressures on North African migrants and help achieve the World Bank Group’s goal of reducing remittance costs to 5% and the UNSDG target of 3%. Key findings revealed that North African migrants had diverse remittance behaviors, with varying frequencies and amounts sent home. Trust in traditional banks remained high due to familiarity, cultural norms, and accessibility issues in rural areas. However, neo-banks offered significant cost savings, with potential annual savings ranging from €30 to €134 depending on the monthly remitted amount that ranges between a €100 and a €1000 . Adoption of neo-banks was higher among younger, and digitally literate migrants with better access to technology.
Barriers to wider adoption of neo-banks included limited digital and financial literacy, lack of necessary technology in home countries, and cultural resistance to change. High regulatory and compliance costs for traditional banks also contributed to inflated remittance fees. To address these issues, the paper recommends enhancing market competition, improving access to new payment technologies, encouraging larger remittances through incentives, learning from successful public bank models like France’s La Banque Postale, and fostering financial literacy and digital inclusion. Additionally, it suggests building trust and cultural sensitivity, investing in robust cybersecurity measures, and developing offline transaction capabilities to increase accessibility for migrants in remote areas.
In conclusion, reducing remittance costs to the UN-SDG target of 3% is achievable but requires a comprehensive approach that addresses technological, educational, and cultural barriers. By enhancing accessibility, trust, and financial literacy, neo-banks can significantly reduce remittance costs and improve the financial inclusion of North African migrants.
The abstract is also available in French and Arabic