Redefining remittances: FinTechs during COVID-19
According to new projections by the World Bank, remittances are set to decline by 20% as COVID-19 takes a toll on migrant employment and wage levels.
However, during these uncertain times, remittances are more important than ever.
Studies show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households. A fall in remittances affects families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
For digital-first remitters and similar FinTech services, this presents a robust opportunity to not only demonstrate purpose in assisting customers in times of hardship but also value in delivering a fair, reliable and COVID19 friendly service.
Keeping migrants connected with loved ones
When COVID19 struck, the world changed overnight. From China to the UK, working structures changed, schools were closed and social lives were replaced with special distancing measures. For many, this has led to new responsibilities, including but not limited to picking up work from furloughed workers and navigating home-schooling duties.
But for the migrant community, its impact has often gone under-reported. With all but essential travel halted, migrants have been unable to travel home and see loved ones. What’s more, with nearly a quarter of the UK workforce furloughed, many from traditionally migrant-occupied roles, the pandemic has amplified existing pressures to stay connected with loved ones while being able to manage money efficiently. The challenge migrants face is striking the right balance between financially supporting themselves and looking after those who are dependent upon the additional income back home.
It’s here that digitally native money transfer services can play an instrumental role in redefining remittances. They need to show that they understand the challenges migrants face and are on their side. In doing so, they can build trust in digital and demonstrate how it can offer fast, transparent, fairly priced and convenient remittances.
Accelerating digital transformation
In some ways, the COVID-19 pandemic has produced a unique outcome for legacy and digital upstarts in the remittance space. Over the last few years, there’s been significant momentum in the way of driving digital service engagement and adoption amongst their customers. Unlike other areas which have been driven to digital transformation by a need to maintain a competitive edge, such as in retail, the remittance sector has been comparatively slow to embrace a future powered by technology. This is because traditional cash-based remitters with physical stores have built trust amongst a loyal customer base.
Under COVID-19 conditions, however, this is changing. With the option of visiting a physical store removed by lockdown restrictions, it is the consumer that is driving digital transformation needs. They have found that their existing routines and practices must be replaced by a service that lives online. For incumbent remittance services, this has led to new product launches. But for digital challengers, it has presented an opportunity to demonstrate the ease, accessibility and longevity of the service they provide.
The digital remittance experience
As consumers look towards alternative options, FinTechs must take the initiative to demonstrate their purpose and value in times of hardship.
Through the benefits of digital, these providers can offer guaranteed and fair exchange rates, ensuring that migrants who may be undergoing financial difficulties are not stung by hidden remittance fees. What’s more, they can provide consistent and accessible support. At TransferGo, for instance, we have in-country representatives for each market we operate in. This ensures that customers are able to speak to agents who understand local discourse and issues, and can advise on an appropriate solution. It ensures customers, particularly those who might be new to digital remittances, are not alienated or confused by speaking to an agent in a different country.
Moreover, their value comes in the transparency of digital. Unlike unreliable legacy systems, digitally native money transfer services can provide accurate and real-time data on how long remittances will take and offer transparent information on where a payee’s money is. Where migrants may already be under significant pressure to provide for themselves and loved ones back home, remittance services should alleviate, not contribute towards, any distress. Through demonstrating purpose and value through the pandemic, there’s an opportunity to build trust with a new customer base and keep migrant communities connected with those they treasure most.
A New Era
COVID-19 presents a significant opportunity for FinTechs to demonstrate their value and purpose in the remittance market. While much of the world has closed its hatches, the migrant community remains as reliant upon money transfers as ever. Families and loved ones still require the additional income, maybe even more so that the pandemic is causing economic uncertainty and jobs are not secure. As it’s not possible to visit physical stores and interact with customer agents face-to-face, migrants are likely to turn to digital remittance services instead. With this in mind, FinTechs must champion their transparency, fair and reliable exchange rates, and ease-of-use to help migrants stay connected with those back home and recognise why digital is the future.
This article was contributed by Daumantas Dvilinskas, CEO and Co-Founder of TransferGo
