There’s no denying that COVID-19 has disrupted the global economy as hundreds of millions of people around the world have had to grapple with job losses, business closures and lockdowns.
Its devastating impact can also be felt among expat and migrant communities whose lives have been disrupted as a result — many migrant workers across the world are facing reduced incomes, placing more pressure on their finances and reducing the amount of money they are able to send to their families back home. This issue is having particularly negative impacts on developing countries, specifically those which are the largest recipients of remittance payments and are largely dependent on remittance payments as a key source of capital income.
According to The World Bank, middle- and lower-income countries receive remittances at about the same level as foreign direct investment. In fact, remittances represent between 5% and 20% of their GDP in some developing countries. Despite this, remittance fees to these countries are still very high and, in some cases, involve a fee which is equivalent to 7% of the value of the payment.
So when it comes to remittance payments, The World Bank has recommended that public authorities in these markets treat remittance service providers as essential services during the pandemic.
Businesses are lending a hand
Over the last couple of months, we’ve seen many businesses feeling a sense of moral responsibility to act during these extremely challenging times. Whether that’s by offering free services for a number of months, making donations to help local communities or tailoring their product offerings to help provide personal protective equipment (PPE) to essential workers or their own employees, businesses are stepping up where they can to make their services more widely accessible.
Players in the payments ecosystem should not be exempt from this. Financial institutions and payment providers have a duty to provide essential services during the COVID-19 crisis —especially when it comes to delivering remittances cost-effectively without interruption to developing economies— to minimise the negative impact of the pandemic and lower the cost of cross-border payments where possible.
Some problems are too large to address alone
Business collaboration and shared specialist knowledge are crucial to mitigate the impact to people’s vital remittance flows in these challenging times. For example, Ripple is partnering with global financial institutions such as Azimo, TransferGo and Siam Commercial Bank — all of which serve the developing markets most affected by the remittance crisis — to reduce or waive transaction fees during the pandemic. By temporarily lowering fees, providers can continue to deliver faster and affordable payments to the people who are most reliant on inbound remittances to sustain their economy.
Another example is Xendpay, the first payment provider to offer a ‘Pay What You Want’ model for remittance payments to developing markets - also in partnership with Ripple. This business also committed to waiving fees for essential workers during the pandemic, as it recognises the financial burden that the pandemic is having on those who work night and day to protect us. By offering no-fee transfers, key workers were able to get easier access to cross-border payments and make use of faster remittances to send money to those in need from Xendpay.
Not only are remittance providers offering emergency support to its customers, traditional banking institutions are also recognising ways they can provide emergency support to those facing financial challenges from the pandemic — including those who have been furloughed or are currently out of work. For example, Barclaycard is removing late payment or cash advance fees, offering payment holidays and ensuring its digital banking systems are available to all customers, particularly those self-isolating and where customers are unable to visit bank branches due to lockdown measures.
While the pandemic has caused huge uncertainty across the globe, it’s with collaboration and the latest technologies that businesses can help us navigate through this difficult time.
COVID-19 has accelerated a shift in mindset
Despite the considerable socio-economic impact the pandemic is having on the world, initiatives like this which mitigate COVID-19’s impact can also have a positive long-term effect on the evolution of cross-border remittances. There’s no doubt that throughout history, great disruption has accelerated change. We must embrace the evolving landscape that the coming months promise.
To do so, business decision-makers need to make necessary changes that will ensure that innovations borne out of the current crisis endure and lead to better services for the future - particularly with regard to more collaboration and knowledge sharing. To mitigate the impact of further disruption, industry players need to come together. By complementing one business's expertise with another, we can be better prepared to operate effectively no matter what challenges may lie ahead.