The effects of the global lockdown necessitated by Covid-19 continue to be felt by migrants and remittance providers alike. It’s encouraging to see public and private sectors coming together to work towards innovative new solutions, but more needs to be done – and done at a pace that emerging markets are comfortable with.
The global remittance industry provides a crucial function that enables millions of economic migrants to move their money seamlessly, offering convenience, trust, speed and reliability.
It’s a tough time, especially for economic migrants, who are having to leave other jurisdictions, such as the GCC countries, as infrastructure projects are cancelled. There’s questions to be answered about the long-term impact of Covid-19 on migration patterns. Amidst the disruption created by Covid-19, many remittance providers have also had to close locations because they’re not classed as essential services. Those lucky enough to remain open have had to restrict operations to ensure the safety of customers and staff.
As Osama Hamza Al Rahma, CEO of Al Fardan Exchange, highlighted in May’s IAMTN webinar, this disruption is truly unprecedented because it affects all commercial and economic activities, regardless of industry, sector or geography. It has added to the other challenges that the remittance industry was already facing, such as mass derisking and stretched liquidity.
Collaboration amidst the disruption
The severe disruption of remittance flows is disproportionally affecting migrants, diaspora communities, and the families, communities and economies that rely on receiving remittances in low- and middle-income countries.
On 16 June 2020, the annual International Day of Family Remittances (IDFR), the International Organization for Migration (IOM), Switzerland and the UK, in partnership with World Bank/KNOMAD, UNCDF, UNDP, the International Chamber of Commerce and IAMTN, launched a call to action: ‘Remittances in crisis: how to keep them flowing’. We have also joined the accompanying Remittance Community Task Force as its industry representative.
Speaking at the virtual launch event for the call to action, IAMTN Chairman Mohit Davar said: “It’s important to note that these people are economic migrants and have travelled thousands of miles with the sole purpose of earning money and sending most of it back home to make their families’ lives better and their future brighter. As such, these people tend to be extremely entrepreneurial and resilient, and have been receptive to the new channels that have been made available to them.”
He outlined how industry leaders have stepped up to the plate. Given the ongoing lockdown measures, remittance providers are rethinking ways in which to expand their agent network. Some are planning partnerships with businesses that remain open as essential locations so that they can provide new access points for migrants and families. Many have introduced fee-free services – Azimo, for example, is offering both new and existing customers three free transactions. Others are providing food, protective equipment and pharmacy services alongside the usual remittance services.
A responsible approach to digitisation is needed
They’ve also focused on, and promoted, digital channels much more. Those who didn’t already have a digital offering have accelerated their efforts. In fact, IAMTN’s recent report, based on a survey of more than 150 money transfer operators (MTOs) and other remittance service providers, revealed that scaling up digital channels was the top priority for providers, fuelled by physical closures and staff isolation.
MoneyGram reported 100% year-on-year digital transaction growth in May 2020 – a significant acceleration from the first quarter where the company reported 57% growth. Western Union, meanwhile, has said that its May digital business set a 10-year record high.
However, there are a couple of important points to make. The first is that while digital innovation is to be encouraged, we can’t forget about the important role that cash still plays for many. In Senegal, for example, even though 70% of adults had a mobile phone in 2017, there is still a widespread dependence on cash to send and collect remittances.
Speaking at IAMTN’s June webinar, Nium Co-Founder and CEO Prajit Nanu highlighted that some people are on “a forced journey”, stuck at home and so forced into exploring apps and e-wallets. When restrictions lift, many will seek a return to cash. Another panellist, MoneyGram’s CFO Larry Angelilli, added that “for us, if someone uses their app to send but the recipient picks it up in cash, that’s a digital transaction. So digital doesn’t alleviate the need for existing agent networks.”
Alonzo Venegas, Ria Money Transfer’s Chief Revenue Officer, was also a sp