OVER the past 18 months, the global remittance industry has evolved favorably despite being affected by lower employment in the G-20 countries. Lockdowns and closure of borders have also made traditional remittance models more difficult.
A recent World Bank report on migration and development revealed that remittance flows have defied predictions and remained strong during the Covid-19 pandemic. Government support programs for families back home helped the sector record more than $540 billion in 2020, which is just 1.6 percent below the 2019 level of $548 billion.
However, digital remittances grew strongly as migrant workers and remittance receivers became more familiar with online transactions for cross-border transfers. According to international money transfer processing firm UniTeller, remittances have been transforming toward digital for several years and this trend has accelerated since March 2020.
“We see that the larger digital providers have grown at very dynamic growth rates, well above the traditional providersUniTeller CEO Alberto R. Guerra said in an online interview. “Also, the growth in mobile wallets has been an enabler of digital remittances.”
Guerra said it is estimated that last year, global remittances sent and received through mobile money have increased by 65 percent around the world, reaching a total of $12.7 billion.
“People are now more comfortable with digital transactions, which will likely become more mainstream in the near future.”
In UniTeller’s case, its digital remittance platform is gaining more traction as more companies can now offer digital-based solutions without the need to invest in developing a digital capability. This has benefitted the unbanked population, although there is room to increase adoption. Cash still remains king among low-income remittance recipients who are used to spending money right after an ATM withdrawal or a visit to a physical remittance agent.
To ensure that migrants have affordable options, money transfer service providers need to continue leveraging new technologies to further benefit senders and receivers. Increased accessibility of remittance channels through adequate digital infrastructure and payment networks in both origination and destination countries will go a long way toward increasing financial inclusion. In turn, this will translate into more affordable and transparent options for the consumer.
UniTeller Philippines President and Country Director Noel Fernando Cristal believes that remittance players need to continuously push initiatives to boost the adoption of digital transactions, saying “we have to look at making usage more universal across the country, building customer loyalty, and increasing merchant acceptance.”
This is where government efforts like the Bangko Sentral ng Pilipinas’ recent push for a national QR code would be critical in ensuring that the road to a cashless society will be more inclusive.
Cristal disclosed that in the Philippines, total remittances during the first half of 2021 at $16.6 billion have outperformed pre-pandemic levels. This is not only a positive sign for the industry amid the ongoing crisis, but it also demonstrates the dependability of remittances for families during times of need.
Guerra sees a gradual recovery of global markets in 2021, driven by the positive strides in global vaccination programs.
“Developments on the vaccine front have provided signs of resilience and relief that the worst may have passed. While global markets remain uncertain, with some countries experiencing a resurgence in the past few months, remittances will continue to be a critical lifeline for families worldwide,” he shared.
Given that the pandemic has quickened the adoption of digital remittances, both Guerra and Cristal think that cashless transactions will grow further as fintech players and governments improve digital infrastructure and channels. They foresee 2022 as the year of opportunity for the fintech sector to deliver its full potential in enabling greater inclusion for unbanked communities–particularly for the Philippine market as it gains momentum in mobile wallet usage.
Joseph Gamboa is the co-chairman of the Finex Annual Conferences for 2020-2021, chairman of the Finex Business Columns Subcommittee and director of Noble Asia Industrial Corp. The views expressed herein do not necessarily reflect the opinion of these institutions and the BusinessMirror.