COVID-19 has quickened the transition towards digitisation. Among the businesses transitioning to an online approach, financial organisations needed to come to terms with the infrastructure that allowed digital payments and efficient online services for their customers to use to stay afloat.
Digital remittances became more critical than ever for diaspora working and living abroad. Migrants were forced to find a new way of life to ensure their loved ones were cared for amidst the changing circumstances.
One important question remains, whether digital payment systems will continue to play an essential part in improving the way we handle financial transactions or are these innovations only temporary solutions for the global crisis?
WorldRemit, a leading digital payments provider, connected with a few of its country directors around the world to provide a glimpse of what the future may hold for digital remittance systems.
Do digital remittances make a difference?
The International Monetary Fund noted that diaspora remittances are the largest source of income for many emerging economies and developing countries, citing that remittances account for approximately 6% of the overall gross domestic product (GDP) in these developing countries.
Several WorldRemit commercial directors highlighted the importance of remittance through customer experiences and growth observations over the past few years. Indications show digital remittances continue to gain momentum and there are no signs of slowing down.
Earl Melivo, WorldRemit’s Country Director for the Philippines, said there has been strong growth in digital remittances and an increase towards digital adoption. He added: “WorldRemit’s receive volumes have increased from a 26% share in 2019 to 45% in 2021 across the Philippines.”
Trends also indicate increased levels of acceptance of digital remittance systems in developing countries. A March 2021 TECHMONITOR report highlighted this trend in multiple countries, including the Philippines, China, India, Mexico and Tonga.
This report described how many expected COVID-19 to seriously hamper migrant workers and their ability to send their remittances home. In contrast, remittance transfers remained steady and even started to increase through digital means.
WorldRemit’s country managers for Senegal (Mamadou Wilane) and Malaysia (Rizuan Aziz) detected similar increases in online money transfers as those found in the Philippines. Their observations confirm that developing countries are turning towards digital means to send and receive money.
Making money transfers faster, easier and more convenient
When considering a migrant’s living experience, it is pivotal to consistently remind oneself that they are living a life with two worlds top of mind. Caring for those typically far in distance but close in priority and care is vital to the stability of migrants’ loved ones, and adds an expected layer of pressure for those living abroad to choose viable systems and services for getting money back home.
Ridzuan Aziz, Malaysian Country Director for WorldRemit, shared examples illustrating how MTOs have helped people make their lives easier. Commenting on a mother in Malaysia who regularly sends funds to her daughter, who lives and studies in the United Kingdom money for tuition and living expenses, Aziz noted: “This particular client sends large amounts of money, and most of these transactions occur close to deadlines as her schedule is busy. Her ability to track transactions and communicate with WorldRemit’s customer support gives her the peace of mind that her transfers are in good hands and handled on time.”
WorldRemit’s Country Manager in Senegal, Mamadou Wilane, received feedback that receiving money over the weekend or after working hours was especially challenging for recipients in his region. Understanding the need for convenience, Wilane ensured these people would be able to utilise WorldRemit’s services when most convenient for them, by optimising strategic partnerships in the region, to guarantee the customers’ needs came first. “Their beneficiaries were able to access funds outside official business hours through a convenient payout office,” he noted.
A growing shift or a fad?
In the past, processing remittances involved lots of paperwork, slow transfer times and high fees. In some cases, both the senders and receivers had to be physically present at locations to send and receive funds.
Before the pandemic, digital remittance services were already established, and people had slowly started to shift towards this easier and more convenient way of managing money transfers.
While COVID has increased the use of digital services in our daily lives and for migrants specifically, there is a noticeable difference in the level of digitisation between different regions and countries. Scott Eddington, WorldRemit’s Managing Director of the Asia-Pacific region, reports that countries like Australia and New Zealand are mostly digital on the money send and receive side using e-wallets and mobile money services.
This was supported by Carine Umurerwa, Country Manager of Rwanda, who said, “the biggest shift we are seeing is consumers are now used to receiving money from a mobile money account. The key trend increases around key holidays and seasonal events throughout the year.”
Melivo finds remittance senders welcome the change to digitisation, but receivers mostly prefer their cash-only practices. He noted: “For recipients… opportunity lies in shifting towards digital financial services, but opening up a bank account or signing up to a wallet service… might still be challenging for older recipients.”
However, Aziz found the opposite in this region: “In general, Malaysia is quickly becoming cashless – everywhere. In addition, the pandemic and recent floods have accelerated and fortified the need to be cashless via digital platforms – for sending and receiving funds, both domestic and cross border.”
This was also supported by Alvin Tay, Country Director of Singapore, who stated: “We are seeing a general uptick in customers using digital remittance platforms over traditional brick & mortar stores [since COVID-19 emerged in 2020].”
In West Africa, Wilane noted a gradual transition towards digitisation as more people begin to use mobile banking and digital banking services to handle their money matters.
From these observations, it seems that developed countries are becoming fully digital while developing countries are adopting digitisation at varying rates. As we look to the future, it will be important to continue to educate remittance recipients on the value they have the potential to utilise through digital options.
Navigating obstacles to meet future demands
The ongoing pandemic remains the biggest challenge when it comes to physically accessing funds. Beyond that, natural disasters, such as the recent Tropical Storm Odette in the Philippines and tsunamis caused by the undersea volcanic eruption, disrupt both the power and internet, making it challenging to adapt to the new ways of living forced onto us by COVID.
Trends indicate these challenges especially affect receivers as they battle to find locations to access money or can’t use digital methods such as e-wallets due to infrastructure problems. Many migrant workers are stuck overseas, and digital money transfers are the only way to get money home.
Leading digital remittance companies should use the opportunity to promote the faster adoption of digital methods by all institutions and countries to make life even easier for money senders and receivers. Governments, especially in developing countries, can create and change financial policies to support digital adoption and further encourage the shift.
With online digital money services offering convenient, competitive pricing, foreign currency exchange rates and fast transaction speeds, this will continue to attract customers across the globe. Recipients can easily access money through various cash collect points and other digital means such as e-wallets or mobile money. Senders can access the service and transfer funds whenever and wherever they need it.
Aziz confirmed these experiences and highlighted customer satisfaction with their transparent practices. “We offer the largest digital international money transfer network. Our customers can track the status of each transaction and ensure easy communication with our customer support team, ensuring a trustworthy and reliable platform.”
Melivo confirmed that: “The importance of remittances to the Philippines is highlighted by the fact that Filipinos are using these services to send money to provide education for their children and extended families whilst also providing support to aging parents.”
As demand for digital money transfers grows and becomes more and more competitive, services should continually review their service parameters, such as pricing, access and transaction speeds, to remain relevant and competitive. Incorporating strategies to address digitisation infrastructure and education is crucial and will help make online remittances more convenient on both the sending and receiving sides. Remittance services must address observed gaps, such as a reluctance to use mobile money and e-wallets in developing countries.
The WorldRemit observations confirmed an increasing move towards digital money management. COVID-19 has sped up this shift but is in no way solely responsible for the observed growth and demand. Online payment systems are here to stay and will change how we handle our finances.