Remittances need fintechs to step up during the coronavirus outbreak
As we adjust to a "new normal" — in limbo between full lockdowns and a post-pandemic future — we find ourselves living our lives increasingly online, everything from food ordering and delivery to sourcing news, dating, financial products and services.
This week the world recognizes the United Nations' International Day of Family Remittances, and while it's certainly occurring under unprecedented conditions, it's hard not to think how the world has changed and that many of these changes may be here to stay — not least of which is the digitization of payments.
While the shift into digital-first technology preceded the pandemic for many of us, the remainder are now flocking to this medium out of necessity to live, work and support families through money remittances or other forms of micro-value transfers such as mobile top-ups via an app or online medium. The pandemic, as it closed brick-and-mortar stores around the world, made the traditional way of sending and receiving money more difficult, pushing remitters online in greater numbers.
Remittances remain the lifeblood of communities around the world. The UN reports the market directly involves 200 million migrant workers, half of them women, and their 800 million family members back home. There are signs are inflows will be significantly affected this year. These flows, on average, make up 60% of recipients’ family income; in the eight largest receiving countries they are the sole source of cash for about a fifth of households, according to the UN.
Our own research supports the continuing demand for sending remittances among diaspora workers to support loved ones. In a recent survey we found more than 85% of our customers who send mobile top-up funds also send money remittances to family — more than half doing this at least once a month, with 20% sending as often as once a week.
The pandemic has exposed the potential benefits of transacting online to new audiences, and appetite has never been greater for fintech products which make sending remittances and transacting online easier, quicker and cheaper. The move to digital providers could mean cheaper cash transfers for demographics hardest hit by this pandemic — with both senders and receivers being financially affected. Neobanks, or wholly digital banks, such as Monzo, Revolut, N26, Starling, Zeta and Chime, and online money remittance operators are finding huge demand for their products and services. Inflows to these businesses in recent months have been significant.
Forty percent of consumers we surveyed said they now had an online bank account. Of those who did not currently have an online account, almost half surveyed said they are now considering opening an account with a digital bank. Among those interested in going digital, 70% said they like the idea of using one app, or provider, to fulfill all their needs — such as banking, bill payment, money transfer or mobile top-up.
Undoubtedly this is the way of the future, and neobanks are changing the face of the global banking system by providing customers with a proliferation of services beyond those of traditional banking — such as seamless bill splitting, spending breakdowns and budget trackers, all available within a sleek user interface.
It's no surprise that international remittance companies such as Remitly, TransferWise, Paysend, Azimo — which are helping to make sending money more cost effective and affordable — are seeing growth rates of 40%-plus during the pandemic.