Consequences of COVID-19 on the remittance industry
The short-term implications are already becoming apparent in the remittance sector. The volume of remittances is declining worldwide during this coronavirus crisis. The logical consequence of the situation caused by COVID-19 is that the income that immigrants receive is likely to be reduced as a result of the temporary or total closure of businesses, especially those with a large immigrant presence such as the service, industrial or transport sectors. The inoperativeness of these companies would diminish immigrants’ opportunities for income and, as a result, the volume of transfers and amounts would be reduced. In this regard, Manuel Orozco, Director of the Migration, Remittances and Development Program of the Inter-American Dialogue, estimates -in a comparison with the 2009 recession- that 35% of migrants will send up to 5% less than they did before the global pandemic.
Another of the short term implications are the remittance agents on which the consultant and lecturer Hugo Cuevas-Mohr also reflects in his last publication. Until just a few months ago more than 80% of remittances were managed in retail, in cash. Currently, there are several scenarios related to agents: On the one hand, there are agents who, by their own decision, have decided to close down temporarily. On the other hand, there are countries that have opted for the mandatory closure of these agencies. And finally, it should be noted that there are countries such as Spain where, despite the fact that the law allows the opening of these businesses because they are considered essential services, the authorities have ordered to close them anyway.
And finally, there are the remittance companies themselves (MTO). In the midst of this crisis, MTOs have had to adapt quickly in order to continue guaranteeing the same quality standards in their services. But, above all, remittance companies are still struggling to make it easier for their customers to convert to digital services and to give them all the information they need in this period of uncertainty. As companies, they too can see their capacity affected to a greater or lesser extent.
A digital boost?
According to Leon Isaacs, CEO of Developing Markets Associates Global and an expert in the remittances sector, the situation caused by COVID-19 could be a necessary turning point for the transition from retail to digital in the world of remittances. This is the main long-term implication expected from the coronavirus crisis: a digital boost. However, it is still early to confirm this.
Until now, although most MTOs offer online services, in many cases the consumer have preferred to send money through agencies. However, today, many immigrants will not be able to physically visit remittance agencies, either to send or receive money. Thus, the digital way becomes the best alternative. Money transfer operators are putting the customer at the center and focusing their efforts on showing the consumer the benefits of online or App transfers, often at more competitive prices. Many receiving countries also have mobile wallet services. On the other hand, in Europe we’re beginning to notice a reluctance to accept cash in stores for fear of human contact and, as a result, the virus. This is a further incentive for the use of digital payments.
Therefore, given the lack of alternatives, immigrants would find the online service the solution to continue sending money to their families. In this sense, Leon Isaacs adds:
[mkd_blockquote text=”Once they change, it is unlikely that they will return to their traditional cash-based services, especially now that the social benefits of going to an agency are not available.” title_tag=”h2″ width=””]
Is there a positive takeaway from this new paradigm? Yes, companies are getting closer to their customers and adapting more than ever to their needs. Remittance companies are not only explaining the benefits of online, but they are also providing support and explaining how it works in detail, making it accessible to as many people as possible, taking care of the largest number of immigrants. It is a challenge, but also an opportunity that MTOs should not miss. Making the right decisions and improving the accessibility of online financial services will, in the long term, be beneficial for the growth of the sector and for the financial inclusion of millions of immigrants around the world.
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