The pandemic’s digitisation of the financial industry has caused a huge wave of innovation in the remittances sector. New ways of sending money abroad in a cheap and fast manner have been developed, with a lot of this stemming from increased smartphone usage as people were forced online.
Though there is still some way to go in bridging the gap between those with access to end-to-end digital services and those who have to make do with cash, according to Karen Jordaan, Head of UK at WorldRemit, fintech innovation is on course to better the lives of millions.
Speaking to The Fintech times, Jordaan explains how the pandemic’s digital revolution can benefit the global remittances sector:
Without doubt, the covid-19 pandemic has affected aspects of human life across the board. While there’s much speculation on what shape the long-term changes will take, the short-term changes have already hit, particularly in the technology sector. Developments in a range of new communication and collaboration solutions, which may have taken many years to reach the market, have come to be in just a few months.
The demands of this new world are driving the growth of ideas and technologies. In particular, the significant global growth of online digital remittance payments has the potential to bring greater financial security and economic opportunity to millions of ordinary people.
A Massive Shift to Online Payments
The restrictions, lockdowns, and social distancing imposed by covid-19 have been a huge driving force behind the demand for online money transfer services such as WorldRemit. Almost overnight, people around the world, and the families they support, have discovered a need for secure, reliable online remittances.
They’re looking for providers that are able to offer a selection of useful services as well as low fees and competitive exchange rates. In response to this demand, digital providers are offering flexible and customisable payment options in addition to cash pick-up, including secure bank-to-bank transfers, mobile-to-mobile money transfers and pay-as-you-go mobile top up facilities. Some providers are even facilitating cash withdrawals from locations such as shops and supermarkets.
This shift towards online payments is a trend that’s predicted to continue as the world enters a ‘new normal’. As a major remittance source country, the UK has seen a 30 per cent growth in its digital remittance market during 2021. According to Statista, it’s predicted that this market will grow to more than $4.6billion by 2025.
The Benefits of Inclusion
While the need for online money transfers is experiencing strong growth, the reality is that they’re only available to people who have access to the technologies required.
Fortunately, the global demand for online remittances, particularly in developing countries, is being matched by a swift evolution of internet-capable devices in these key markets. Widely available smartphones are leading the charge as a cheap and popular connection technology.
This evolution means that the populations of countries such as India and Nigeria – traditionally the UK’s largest remittance destinations – are able to take advantage of these digital services.
In another example, statistics show that five years ago, the smartphone penetration of India was just 22 per cent. By 2021, this penetration has topped 60 per cent, with estimates of 80 per cent penetration in a further five years. In Nigeria, the number of smartphone users will hit over 140 million – out of a total population of 206 million – by 2025. The consequence of the spread of sophisticated hardware is that both individuals and wider economies can benefit from an increase in online remittances.
As available services and access to the internet expand, so too does opportunity. Alongside the pandemic-driven uplift in eCommerce, there has been a growth in online purchases by sections of society – such as women and people who have historically struggled with access to education – who, in some countries, had traditionally been denied such online access.
The Cost of Exclusion
Digital exclusion is not only in place in the developing world. Although for many UK citizens, the transition from the workplace to the home office has been a relatively easy one, for others, the covid-19 enforced experience of the last 18 months has been severely unsettling if not devastating.
Lockdown and the almost complete closure of the leisure and hospitality sectors has meant that many people have had to rely on digital working, digital socialising and digital services during their daily lives. Without access to the online world, an individual’s financial freedom and ability to participate socially and economically is drastically affected.
In the UK, it is estimated that as many as 11 million people are digitally excluded. Around the globe, these figures are even more alarming, with more than 3.7 billion people living an offline existence.
The fintech community has addressed this exclusion and digital solutions have been combined with the traditional to provide services to people without access to the internet. Using organisations such as WorldRemit, people are able to send money in a secure, digital manner to be picked up by the recipient in cash – a blessing in those countries with lower internet access.
Cost, Confidence and Convenience
So, we can see that the global growth of digital remittances is playing a critical role in expanding access to capital and opportunity. Regrettably, there’s still a large gap to be bridged between those with access to end-to-end digital services and those who have to make do with cash.
Fortunately, the fact that the online money transfer market is thriving means that it’s driving the adoption of cheaper and widely spread tech such as tablets and smartphones, which are becoming available to more and more people. In short, the digital remittance explosion is part of a revolution that has the power to transform millions of lives for the better.