However, contrary to expectations, the overall use of remittance “remained resilient in 2020”, according to KNOMAD, the global knowledge hub on migration. According to their latest Migration and Development Brief, “remittance flows to low and middle-income countries reached $540 billion in 2020, 1.6 percent up from 2019”.
This is a far cry from what was previously expected to happen to remittance during COVID. According to the research, the fiscal stimulus, evolving digitalization of money transfer channels, and cyclical changes in oil prices, all contributed to the resilient nature of these remittance flows.
The Unexpected Impact of COVID-19 on Remittances
During the early months of 2020, the Center for Disease Control (CDC) declared an emergency shutdown of nearly all public spaces, due to an outbreak of what the world eventually came to know as the Corona Virus, also known as COVID-19. A highly contagious virus that was reported to have been linked to the deaths of millions (in total) globally. The CDC had warned back then that the virus could have devastating effects if major steps were not taken to prevent its spread.
Unfortunately during this time, hundreds of thousands of people lost family members, homes, and livelihoods when the pandemic struck. And while a vaccine was still under development at the time, thankfully, remittance services were instrumental in
helping many families stay afloat and financially survive the pandemic.
And now, as we observe the world post-pandemic, for many who have family members overseas, remittance still remains an important lifeline in helping many families recover and rebuild after COVID. Remarkably, this financial practice is still very much alive, despite all that has happened during, and post-pandemic. Because the truth of the matter is: people will continue sending money back home!
In fact, some might argue that the number of immigrant workers and families who continued to use remittance services increased after COVID-19. Why?
What is the reason for an increase in remittances, as opposed to a steady decline, during these difficult economic times for everyone?
This could be the case for some of the following reasons:
They still need help from their families back home: The supply and demand chain of goods and services was disrupted because many people lost their jobs due to COVID-19; they had no other option than to sell their assets (e.g. property, cars, etc.) or ask friends/relatives abroad to send money through remittance channels.
They want to help their families recover from COVID-19: In other instances, remittance during COVID played an essential role in providing funds to cover medical and healthcare costs for relatives who were impacted by direct contact with the virus.
They want to send money back home because they believe they will return someday: If a migrant worker’s family is expecting him or her to return, it can be nearly impossible for them to give up communications or limit their financial obligations to their family overseas. This is especially true if they have children at home. The children may also be expecting their parents to come back soon, which means, in many cases, they need financial support from their parents as well.
The clear path forward
With all of the data and research to support, it’s quite noticeable that the most effective way for immigrants to support their families during these times is by sending money through remittance — the money transfer system used to send and receive monetary funds from overseas.
In the past, remittance has been an important source of income for developing countries; and was even dubbed the "world's largest anti-poverty program" in migration-related discussions. For example, in El Salvador, remittances account for approximately 20% of their GDP (Gross Domestic Product) and provide financial support for almost half of all households in that country.
And now today, the United States alone is home to approximately 40 million immigrants, with more than 11 million of them from countries in Central America; like Mexico, for example.
In the recent year, remittances to Mexico have increased by 20 percent. This is a significant increase, considering it was only around 8 percent when the pandemic first hit.
This is also due to increased access to rapidly-evolving mobile banking services and digitized wallets that allow immigrants to send money home much easier than before.
Remittances can be sent through banks or money transfer companies, such as Western Union or MoneyGram. However, these money transfer services typically charge fees ranging from 1% to 5% of the total amount being sent for each transaction. Traditional banks are the most expensive, costing nearly up to 11% of the amount transferred.
How Tempo helps immigrants support their families overseas post-pandemic
As more of our world goes digital, awareness of the importance of remittances continues to increase. This has led to the rise of more streamlined, easy-to-use platforms like Tempo, that offer many immigrants a better way to transfer money from the US to North America (Canada and Mexico), Europe (Austria, Belgium, Czech Republic, France, Germany, Hungary, Italy, Poland, Portugal, Spain, Sweden, and the United Kingdom), Australia, India, and the Philippines.
TEMPO was developed by Future Fintech Labs, a fintech service provider and software development company headquartered in New York City. They recognized a need in the $600 billion-per-year remittance market and set out to develop an innovative solution that would make it easier for immigrants to send money back home to their families.
The Tempo app provides its customers with cutting-edge features constantly updated on the app that makes moving money seamless. This includes a multicurrency digital wallet that safely manages your money and tracks your transactions all in one place. Along with providing its users 24/7 in-app customer support, right at their fingertips — and much more!
Also by partnering with other engaged key players in the financial service sector like CurrencyCloud, a global payment platform and subsidiary of VISA company, Future Fintech Labs is proud to provide a reliable remittance service platform that its users can trust.
Remittance services were expected to take a hit after the COVID pandemic — with many predicting that they would plummet or even cease altogether. The truth is that, while the impact of COVID-19 on remittances was evident, it wasn’t in the ways many expected. Contrary to speculations, remittances remained constant throughout 2020 and beyond.
There is a growing preference for digital channels such as mobile wallets and online bank transfers. This trend is likely to continue given that we are now seeing more than 60% of remittances being sent this way. With smarter, more modern methods of money transfer, the overall demand and importance of remittance service apps like Tempo, continue to increase.
Tempo is a reliable, cost-efficient app that helps immigrants send money back to their families in their home countries. Designed to make it easy to send and receive money from overseas. While also helping to stimulate economic growth in these regions, particularly in the aftermath of the pandemic.
Learn more about our unique online money transfer app that is fast, cost-effective, and secure by clicking here.