In a global economy, people’s financial transactions are connected across country borders. Workers look to send money back home to family and consumers purchase items from retailers from abroad. International remittances are evolving to reflect how businesses and people interact.
The recent COVID-19 health crisis brings another variable into the money transfer equation. In a world where governments impose measures to try and stop the spread of a virus, behaviors change. More people are working from home and contact with cash is frowned upon.
While surface transmission may not be the main way the virus is spread, people are still concerned about touching cash. This is leading to shifts in how people think about money.
The International Remittances Market
International remittances are a basic way with which people interact. Estimates show that money transfers across borders suffered as much as 20% in 2020 due to the pandemic. This drop is greater than anything in recent memory, including the 2008 financial crisis.
Lockdown measures force millions of people away from their jobs and it makes sense that remittances decline. Furthermore, people in poor countries that depend on incoming funds from family members abroad are greatly affected.
At over $680 billion in 2018, the global remittance market is expected to grow to $1 trillion over the next five years. This is a testament to the need for reliable providers of money transfer services.
How COVID-19 Is Changing Remittances
Physically facilitated remittances include checks, depositing money at a money service or even sending cash in the mail. This is changing rapidly due to COVID-19. People intending to send money abroad are examining all available options, especially digital transfers.
Fees associated with remittance payments are one of the factors that are driving change in the market. People are seeing their incomes take a hit due to the lockdown measures. Holding onto as much of their money is now a priority for migrant workers and others that routinely send cash overseas.
Another factor that is impacting remittances is the volatility in currency exchange rates. With some national currencies suffering more than others, sending money can often come with a significant loss of value.
For example, people sending British Pounds or Euros enjoyed an advantage when these currencies were significantly stronger. Now, with many currencies in the West losing value, less money arrives in the hands of the recipient for the same initial amount sent.
What To Expect in the Future
Despite the challenges that face remittances, money transfers are not set to decline. As the world struggles to find its footing after the pandemic, people will be seeking to send money for many reasons.
Some will want to support their families back home in their native countries. Others will want to set money aside for a potential move to their homeland.
COVID-19 made a lot of people sceptical about handling physical cash. Many of those people see digital money transfer as the way forward. The fact that banking institutions are examining digital currency solutions is also a nod in the direction of non-physical remittances.
Remittances may or may not be a part of your daily life. Regardless, the aftereffects of COVID-19 are set to influence the way that people transact over the years to come.