Launched in 2015 to build awareness of the contribution that migrant workers make to economies of their home countries, the UN’s International Day of Remittances (IDFR) this year welcomes a more positive picture than had been predicted by the World Bank.
Forecasting in April 2020 that global remittances would decline by 20% throughout the year, the World Bank overestimated the impact Covid-19 would bear on the space, which fell by just 1.6%.
The IDFR recognises over 200 million migrant workers, women and men, who send money home to over 800 million family members, with flows have increased five-fold over the past twenty years.
Resilience in these remittance flows was confirmed in a recent World Bank report which highlights the significant shift from cash to digital channels have played throughout the pandemic.
Starting in June 2020, the report highlights that remittance flows through digital channels increased particularly for migrants with access to bank accounts and credit cards. This switch to digital continued throughout 2020, with data showing cross-border remittances processed by mobile money increased by 65% throughout the year (from $7.7 billion in 2019 to $12 billion in 2020).
“As Covid-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” says Michal Rutkowski, global director of the social protection and jobs global practice at the World Bank.
He adds that “every country has been affected by Covid-19, but the poorest will pay the highest price. Decades of economic gains are under threat, and more than 32 million of the world’s poorest people face being pulled back into extreme poverty. We’re offering all customers a fee-free transfer on June 16 to support hard-working customers sending money to their loved ones.”
To mark this year’s IDFR, digital money transfer service Azimo is offering a fee-free transfer for all senders on June 16. Richard Ambrose, CEO of Azimo explains that the significance of remittances for the families that rely on them for vital healthcare and education systems has been felt this last year more than ever. Around half of the funds sent go to rural areas where 75% of the world’s poor and food insecure live, and most of the money is spent on essential goods and services.”
“But the average cost globally of a single remittance payment is still around 7%. Frankly, that’s far too high. Reducing costs to 3% globally could put an additional $20 billion per year into the pockets of remittance recipients. Why then are banks and money transfer shops still overcharging people to send money to their families?"
He adds: "Now more than ever, people need faster, cheaper ways to send money abroad. Fortunately a new crop of mostly digital remittance providers, are providing them. It’s why today (June 16th) we’re celebrating the UN’s International Day of Family Remittances 2021 and highlighting the role remittances play in people’s lives."
Elena Novokreshchenova, EVP of international for Remitly furthers that Covid-19 meant “that families were truly physically separated, and remittances remained a critical way to support loved ones. With access to brick-and-mortar remittance locations being impacted, digital remittance services such as ourselves were especially relevant.”
Günther Vogelpoel, CEO of branded payments firm Recharge.com said: “Remittances in-kind can bypass barriers like not having a bank account or having your funds controlled by someone else…This can put power back into the recipient’s hands, allowing the sender peace of mind to know their money is being spent on the correct goods and services while giving the recipient the freedom to use what they have received on their terms.”
“This method can also save you money. Remittances are usually sent in one large sum, which leads to higher fees. With remittance in kind or branded payments, people can support their loved ones in smaller and more manageable increments, with more affordable costs and fewer barriers to sending money regularly."
Ian Dillon, co-founder, NOW Money comments: “The restriction of movement forced upon the world in 2020 accelerated digital as the consumer's channel of choice. Migrant workers who have long relied on physical exchange houses needed an alternative option to transfer money safely and quickly to family overseas. Indeed, we saw engagement with the NOW Money app double. During the global crisis, digital financial services acted as both a lifeline for millions of migrant workers and a buoy for remittance flows. Without doubt, digital banking can no longer be considered a luxury, it is an urgent necessity.
“Despite estimates showing a fall in global remittances, inflows from the UAE to Pakistan and Bangladesh bucked the trend, in addition Indian banks saw up to a 20-percent rise in remittances from the Gulf. Interestingly, our own data analysis showed a surge in the average remittance sent to traditionally Muslim destinations during the Holy Season - an increase which far exceeded our expectation.”
Jane Loginova, CEO of Radar Payments furthers: "What we are seeing is migrants and international workers turning to digital payments to reach out to their family members right from their pocket, through their mobile or prepaid cards that can be topped up from a distance. Waiting for days or going to a branch to collect cash is no longer acceptable."
"Fintechs have stepped up the game with very niche community propositions making transfers more transparent, cost effective and instant. Digital cross-border accounts, for example, allow migrant workers to send money via person-to-person transfer directly and instantaneously to recipients in their home country. Equipped with prepaid debit card solutions and different payment vehicles, these accounts can function as a comprehensive alternative to a local bank account."