Market Intelligence: What the Headline Number Hides

A widespread impression of the US-to-Mexico corridor is that it is remittance-heavy. And indeed, it is one of the largest and most famous remittance corridors in the world. A large number of Mexican workers send money home from the US. This is a reasonable picture, but it is very incomplete. The US-to-Mexico bilateral flows are around $900 billion a year, and remittances account for $60 billion of that. The remaining $840 billion pertains to B2B flows. The most definitive remittance corridor has a much larger, more attractive goods story on top of it.

Understanding the market is the first layer of corridor analysis. Here, you ask the most basic questions. Is this corridor worth caring about? What is the nature of this corridor? A single headline number does not answer these questions.

Start with the number, then leave it behind

The headline number for each corridor is the total bilateral flow between the countries. This is the starting point, but it is not very useful when making decisions. While it tells you that the corridor is large, it gives no insight into whether you can play and win in this corridor. For that insight, you must read what lies beneath this market-size number.

There are three things you must read before making a decision. First, what the flow is made of. Second, how much of it you can actually reach. And third, who is moving it.

What the flow is made of

The first layer beneath the total flow is the breakdown into goods trade, services, and remittances. This distinction matters because these are not three parts of one big business; they are three distinct businesses that share a currency pair as a characteristic.

Goods trade comprises importers, exporters, large-ticket payments, letters of credit, documentary requirements, shipping bills, and import and export clearances. Services is a different world. You have agencies, freelancers, consultants, and software firms providing services, invoicing, and getting paid. Payments are much smaller, the cycle is much faster, and there's much less documentation than with goods. Remittances are different again. It involves individuals sending small sums to their family. This is usually much higher frequency and also has a much higher level of price sensitivity.

When you build a product for one of these, it does not necessarily work for the other two. Understanding the composition of the corridor tells you which part of the market your product can serve.

Judging a corridor just by its reputation here is a trap. Most conversations about US to Mexico will categorise it as a remittance corridor and gloss over the significant goods-trade opportunity here. Remittances account for 7% of the total money flow, and using that lens alone means you are likely to either overestimate your market (if you use the total flow as the number) or miss an opportunity right in front of your eyes (the much larger B2B trade).

The Hong Kong-to-Philippines corridor is another example of the same trap. The Philippines also has a large number of overseas workers in Hong Kong who send money home. Everything about this corridor's reputation suggests remittances. Yet of its almost $20 billion in flow, goods trade is $15 billion, and remittances are just $1.5 billion. A definitive remittance corridor comprises 92% business trade. If you evaluated it on the strength of its reputation, you would be building for a fraction of the total flow.

A mistake to avoid is looking at the B2B part of flows without the goods-and-services split. Take GBP to NGN as an example: it has roughly equal amounts of goods and services, at about $4 billion each. These two segments behave differently, and a product built for one may not serve the other. The danger is building a product for a $4 billion corridor while assuming you have an $8 billion opportunity.

How much of it you can actually reach

Another element to assess is the formality of the corridor. This is the part of the flow that moves through formal channels, as opposed to the part that moves through cash and informal networks. Globally, formal flows are rising, so more money is moving through formal channels every year. But in some corridors, the leak is still sizable, which changes how the opportunity looks. For example, HKD to PHP and USD to MXN are highly formal corridors: almost 90% of the money here moves through formal channels. GBP to NGN, on the other hand, has a formal channel ratio of just 70%. This means that 30% of the flow moves through informal channels like cash, hawala, and other unofficial networks. While the total market size may be higher, the formal market size is the serviceable market.

Flipping this into a more aggressive approach means that this is also an opportunity. Informal flows exist because of several reasons: cost, speed, trust, access or taxes. If a business understands why the use of informal channels remains prevalent and builds something to address that reason, it may compete in a white space with little to no competition. So a proactive approach can increase your serviceability.

Who is moving it

The third thing to watch is who receives the flow. While the first split of flows is between individuals and businesses, understanding the operator archetypes, namely consumer remittances, gig and freelance, SMB trade, or enterprise B2B, adds colour to the plans to address the market. Consider HKD to PHP and USD to MXN, which are heavy B2B markets with almost 92% share of total bilateral flows. GBP to NGN has a high individual share, at around 26%. Understanding the composition of B2B trade in HKD to PHP and USD to MXN, and the split between P2P and freelancers in GBP to NGN, helps you understand the corridor's character.

The point of the layer

The point of unravelling these layers is to get a sense of what the flows in the corridor actually are. You start with the bilateral flow, split it into B2B vs. remittances, and further split B2B into goods and services. You check which parts are serviceable, given the use of informal channels. Finally, you move to the customers, the people moving the money. Understanding these customers is a much deeper affair, and that is the next layer.