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COVID’s Impact On Cross-Border Remittances And The Rise In Digital Payments

Updated on September 03, 2020 12:00 am
Digital payments

Sponsored by Xoom, a PayPal Service

Remittance inflows are the lifeline of many households and countries. In 2019, the World Bank estimated that $715 billion was sent by the global migrant community to their friends and families. 77% of that $715 billion was sent to low- and middle-income countries (LMICs) supporting over 800 million households, with India, Mexico, and the Philippines topping the list of highest remittance-receiving countries.

remittance inflows


 

Remittances play such an important role in the economic health of many countries. However, the World Bank predicts that we will see one of the sharpest declines of remittance flows in recent history, largely due to the economic crisis caused by the COVID-19 pandemic outbreak and lockdowns. The predicted decline will have an adverse effect on countries like Sri Lanka, Bangladesh, and Nepal among others that rely heavily on the remittances sent by their migrant workers. For example, close to 30% of the Gross Domestic Product (GDP) of Nepal's economy comes from remittances, which is higher than foreign direct investments.

remittance inflows

During the past few months, the international community of policymakers, governments and money transfer operators (MTOS) has worked intensively to evaluate the legacy issues plaguing the remittance industry and to formulate developments and responses to build a resilient global remittance market that works for all. 

Lockdowns that went into effect in cities across the globe as a result of COVID-19 brought significant limitations to the business of traditional forms of sending money, highlighting the issues people experience when using legacy remittance services, and the importance of digitalization. As a result, the remittance industry has reached an inflection point, as the migrant community increasingly turns to digital services to help them adapt to the changing payments landscape.  

Why should remittances go digital? 

  • Removes dependency on informal remittance channels: Digitization will help reduce reliance on cash-based remittance services that can often be unreliable.
  • Financial Inclusion: A technology-centric framework for remittance services that can help increase accessibility to financial services.
  • Cheaper cost of sending money: Eradicating the middleman, informal channels, and reducing commission will help bring the remittance costs down.
  • Safety amidst pandemic: Digitization of remittances helps enable consumers to send and receive money without needing to visit a physical money transfer location or bank, helping to mitigate the risk of catching COVID.

Online money transfer companies like Xoom serve as the bridge between the challenge and the solution. You can send money online from anywhere using the mobile app, without ever having to visit any physical store, and transactions can be sent quickly and securely at affordable rates.  

Why Xoom?

Xoom is PayPal's digital remittance service. Founded in 2001, it currently serves recipients to more than 160 countries. With Xoom, you can send money to your friends and family around the world from a mobile device or desktop. Here are the Top 3 reasons why you should use Xoom: 

  1. Exchange Rate: Xoom offers competitive exchange rates when compared to other remittance services in the industry. You can easily see the fee and exchange rate prior to sending money by using the Xoom fee and exchange rate calculator.
  2. Fees: Xoom allows you to see the fees upfront using their fee calculator before sending money. Although fees charged depend on the receive country, payment method, payout option, and the amount of money sent, Xoom offers competitive fees. For example, if you are sending $200 or more to a bank account in the Philippines and funding your transfer through your bank account or PayPal, there is no Xoom transaction fee.
  3. Speed: Everything happens at a lightning speed today and as users, you expect the same from service providers. Why should money transfer be any different? With Xoom, transfers can reach your recipient typically in minutes.*

*Limitations apply. 

Traditionally, the cross-border money transfer industry has been dominated by money transfer agents, banks, and post offices. More recently, propelled by the growth of the FinTech industry, it is now slowly moving towards an online model which is a more efficient, inexpensive, and convenient form of money transfer.

As a leading money transfer comparison platform, the most common question we get on CompareRemit is to identify the best way to send money internationally. The best depends on your needs such as recipient country, banking accessibility, the purpose of money transfer (routine vs. emergency) among others.

A few factors to keep in mind while sending money overseas are: Exchange rates, Fees, Speed of transfer, and of course, reviews. Find out what our verified customers are saying about Xoom and other money transfer service providers on our Reviews section

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