Postal services have provided money order services for decades and
play a key role in their domestic low-value remittance markets.
However, the role of postal services in the international
remittance market has so far been limited, something the Universal
Postal Union is working hard to change.
Operating 665,000 outlets, delivering 440 billion items each year
and employing 5 million people, global postal services represent
the world’s biggest distribution network and a marketing platform
reaching billions of consumers. Not surprisingly, post offices have
long been used to supply financial services.
According to United Nations (UN) agency the Universal Postal Union
(UPU), two-thirds of the world’s post offices provide financial
services, executing 10 billion product sales and transactions
annually. However, the UPU, the UN and international development
agencies such as the World Bank believe the world’s postal services
are only scratching the surface of their potential to supply
financial services, particularly in developing economies. For the
UPU, the key financial service to be developed is affordable
international money remittances.
Postal services are already involved in international fund
transfers and, according to the UPU, the world’s postal services
each year execute about 14 million international money order
transfers valued at a total of $4 billion. However, this represents
only a minor portion of total money remittances executed by post
offices in their home countries – a total of about 10 billion
International remittances by postal services are also a minor part
of the total global market which, in terms of inward remittances,
the World Bank estimates increased from $101.6 billion in 1995 to
$275.9 billion in 2006. The World Bank notes that these estimates
are based on officially recorded figures and that the true size of
remittances, including unrecorded flows through formal and informal
channels, is believed to be larger.
The UPU has set ambitious targets for expansion of the world’s
postal services’ role in the international remittance market, with
particular emphasis on serving the world’s fast-growing migrant
worker population. According to the World Bank, there are 190.6
million migrant workers globally (2005 estimate), the vast majority
of whom regularly remit money to their home countries.
Central to the UPU’s strategy to increase the role of postal
services in the remittance market is its International Financial
System (IFS) application software developed by the UPU Postal
Technology Centre (PTC) in Switzerland. The IFS replaces
traditional paper postal money orders and facilitates electronic
fund transfers between postal operators and certain banks.
The UPU has set an aggressive target for global postal services’
large-scale entry into the international remittance market,
spearheaded by a global roll-out of the IFS which is designed to
have all 192 of its member countries connected by 2015.
Alliance with Eurogiro
To assist in achieving its goals, the UPU formed an alliance in
2005 with Eurogiro, an association of payments service providers
headquartered in Denmark. Originally an association of post offices
and postbanks providing European cross-border payment services,
Eurogiro has expanded to encompass banks in developed and
developing countries, automated clearing houses, card providers and
money transfer agencies.
To facilitate remittances between UPU members and Eurogiro members,
Eurogiro’s new Tele Money Order is intended to replace traditional
postal money orders. At present, 60 financial service providers in
52 countries use the Eurogiro network to processes about 30 million
By 2010 Eurogiro targets to increase its user base to 100 and
annual transaction volume to 45 million. In a key move in this
direction, Eurogiro and US bank Citi formed an alliance in August
this year that gave Eurogiro access to Citi’s payment network which
covers more than 100 countries. According to Eurogiro, it is
already the world’s second-largest network provider for
cross-border payment transactions.
The UPU has also done considerable work to upgrade remittance
capabilities of postal services in developing countries.
Emphasising the importance it attaches to cross-border remittance
services in developing countries, the UPU notes that about 90
million people left their country of origin to work in another
developing country. These workers account for between 30 percent
and 45 percent of total migrant remittances.
The first initiative, the Bamako project, was launched in 2006 by
the PTC with the backing of France’s postal service, La Poste
France, in five West and Central African countries: Mali, Burkina
Faso, Togo, Benin and Niger. The project led to the development of
an affordable cross-border electronic payment service and product,
the IFS-based International Express Money Order.
The service came into operation in December 2006 and has proved
highly successful. According to Arthur Kafando, director general of
Burkina Faso’s postal service, Sonapost, within a few months of its
launch existing remittance service providers had cut their charges
by up to 75 percent. It utilises a single processing centre located
in Burkina Faso that the majority of another 21 African countries
that will have joined the IFS network by the end of 2007 opted to
Hailing the Bamako project as a benchmark, the UPU noted it
contributed to the development of new standards for electronic
payment services and creation of a worldwide postal electronic
“If a service can operate well in very poor areas with large
populations of migrants and under-equipped posts, it should,
logically, be possible to introduce the same service elsewhere,”
said Marie-Odile Pilley, a specialist in financial services with
Advancing its strategy in the payments market, the UPU recently
approved the draft of the Postal Payment Services Agreement
covering operating principles, roles and responsibilities of
governments and postal operators.