The spread of the COVID-19 pandemic has disrupted lives, livelihoods, communities and businesses across the world. The remittance industry has been significantly affected, but money transfer operators (MTOs) and other payment providers have responded rapidly and there are encouraging signs and reasons for optimism as people further embrace the digital revolution.
There are more than 270 million economic migrants working in various countries, sending over $700 billion back home each year to support their families and communities.
The remittance industry is what keeps these vital funds flowing. The COVID-19 outbreak has completely changed our world and impacted everyone; however, the impact on migrants has been particularly bad given that they were already marginalised and suffering hardships before the pandemic struck. Many migrants have lost their jobs and with it their ability to send any money back home.
The World Bank estimates that remittance flows around the world will plummet by more than $100bn this year, reducing a crucial source of financing for developing countries as they struggle with the economic volatility caused by the pandemic. In response, we need to come together to try to minimise the impact and limit the potential for further disruption to migrants and remittances.
A mixed outlook
IAMTN is leading the effort to mitigate the impact of COVID-19 on international payments and remittances, bringing together the public and private sectors to collaborate on solutions informed by key industry research. Working with the UNCDF, we recently sent out a survey to over 150 MTOs and other remittance service providers to capture the risks that the COVID-19 crisis poses to the international remittances sector.
The subsequent report revealed that 91% of respondents experienced immediate changes in remittance volumes, with 69% saying that they have been significantly impacted by a sudden decrease in volumes. Some countries have been hit harder than others. South Asia, East Asia and the Pacific region, for example, have been most affected by outbound remittance changes, whilst nations in Sub-Saharan Africa have been the most impacted by the drop in inbound remittances.
“There’s a better picture in Europe, largely due to the stable fiscal stimulus programmes that European governments have rolled out,” says Michael Kent, Founder and Chairman of Azimo, which counts France, Germany and the UK as three of its largest markets. Azimo is offering new customers three free transactions when they first join up, an incentive that has now been extended to existing customers as well. According to Kent, this is helping many Filipino and Nigerian frontline NHS workers in the UK to keep up the flow of remittances back to their home countries.
Elena Gafarova, Head of Business Development at Russia’s Contact Payment System, says that they’ve seen different impacts in different corridors. “April showed a 50% decrease in transactions compared to March, with remittances from Spain and Italy especially affected by the lockdowns which closed the sending agents,” explains Gafarova. “It’s been especially challenging for companies focused on cash to cash only. But after the reopening of many agencies in May, volumes have been restored and even beat the figures of previous months.”
This mixed outlook was evident on last month’s webinar, which brought industry leaders together to further discuss the survey’s findings and was covered by Forbes. A poll conducted during the webinar revealed that 37% of attendees had seen a decrease of 20-40% in their remittance flows, whilst 25% said that their flows had actually increased. This suggests that the impact on volumes hasn’t been as grave as first feared.
“We’ve actually seen an increase in cross-border transactions that go through our MFS Africa Hub,” says Dare Okoudjou, Founder and CEO of MFS Africa. “This is probably the result of two factors. The first is that government lockdowns (or stay at home orders) have moved more cross-border transactions to digital channels. The second is more of a hunch, but we also suspect that the diaspora may be sending more money back home to support their families. There’s some evidence that remittances can spike in response to a crisis, and our weekly transaction volumes increased by over 100% year-on-year during March and April, the peak period of the pandemic.”
“But Africa is behind the general COVID-19 curve, and the challenges that lie ahead for us are not yet clear. We are of course hopeful that the health measures instituted by African governments will spare the continent from the worst, but we are also mindful of the socioeconomic factors that make it difficult to sustain strict regulations on people’s movements.”
Digital marches on
The IAMTN survey also showed that scaling up digital channels was a top priority for remittance service providers, its importance propelled by the closure of physical sites and widespread staff isolation.
This is certainly the case with MoneyGram, which has been busy enhancing its digital offe