The Growing Importance of Digital Remittances During the Covid-19 Pandemic
Our first thoughts during a crisis are of our loved ones, and our immediate concern is for their health and safety. Following that, we try to ensure that they are financially secure during these difficult economic times.
The Covid-19 pandemic posed several challenges for migrants and anyone living far away from their families. During the ‘lockdown,’ migrants could only help their families stay safe by providing financial assistance.
Covid-19 accelerated Digital Remittances acceptance
Remittances are critical during a crisis. Many families rely on being able to send and receive money internationally quickly and easily during an emergency. According to the UN, remittances became a lifeline for many migrant workers during the pandemic. Furthermore, for many receiving countries, remittances accounted for a larger economic contribution than official development aid. With the global lockdown imposing significant restrictions on traditional forms of remitting money, the immediate need for digitization of remittances emerged. In the midst of the pandemic, the migrant community accepted the changing payment landscape, emphasizing the advantages of using digital channels over traditional channels.
Benefits of Digital Remittances
Because traditional remittance channels were limited during the pandemic, many migrants switched to digital channels and saw the benefits of doing so. Digital money transfer is faster, more convenient, and more secure than traditional channels.
- Financial inclusion: A technologically focused framework for remittance services helped in increasing access to financial services.
- Cheaper cost: During challenging economic times, the cost of remitting money can have a significant impact on the amount sent. Informal channels and lower fees helped reduce remittance costs by eliminating the middleman. In addition, when compared to other traditional channels, digital service providers provided better exchange rates.
- Safety in the midst of a pandemic: Consumers were able to send and receive money without having to visit a physical money transfer location or bank thanks to the digitization of remittances. This was especially important during the lockdown when the government asked people to remain at home.
Digital Remittance is the New Normal
Digital remittance services have benefited many people, especially in the midst of social distancing and lockdown measures.
Furthermore, digital remittances have allowed the remittance industry to operate during a global lockdown. Lockdowns and stay-at-home orders prompted us to shift our financial needs from physical to digital storefronts. In 2020, 60% of international and domestic cash transfers took place online (Source: IBS Intelligence). Experts believe the pandemic will be the catalyst for a permanent shift away from cash and toward digital remittances. Especially, since many people started to understand all of the benefits of digital remittance over sending and receiving remittance via traditional players.
Digital Remittances’ growth is expected to continue
Many financial trends have shifted as a result of the Covid-19 pandemic and the economic downfall that resulted from it. However, we must recognize that these changes were forced upon us. The growth of digital payments and digital money transfers shows no signs of slowing in 2022, owing to people’s increasing preference for digital tools and services for sending money overseas. Furthermore, an increase in payment automation and digitization is expected to drive market growth. With more migrants switching to digital channels due to their faster transfer times and lower fees, the digital remittance market is expected to grow significantly in the future. The global Digital Cross-Border Remittance market was worth $6516.3 million in 2021 and is expected to reach US$ 18830 million by 2028, growing at a 16.4 percent CAGR during the forecast period. (Source: fusionmarketresearch).
To conclude, it’s an exciting time in the digital payments industry, and if the last three years have taught us anything, it’s that the sky’s the limit for new innovations.
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Written by: Rim Ghandour