Remittance trends after COVID-19

Remittances are of global importance. For millions of families all over the world, inward remittances constitute their only source of income. Every factor which affects remittances eventually has an impact on a large percentage of the global population. COVID-19 brought many changes to banking, finance, and remittances. Here is a look at some trends that have accelerated since the start of the outbreak.

Cash to digital

One clear trend to emerge since COVID-19 is the preference for digital remittance channels. Cash-based remittances involve depositing paper cash at a physical location of a money transfer operator (MTO) in the host country. It is then sent to the recipient in their home country in one of many ways. Several of the cash-based remittance channels have conventionally been ‘informal’. Overheads and inefficiencies inherent in physical remittances result in higher costs. These manifest as high fees or poor exchange rates. Ultimately the recipients get reduced amounts.

During the lockdowns in 2020, most cash-based services had to shut down. Senders and recipients were forced to use online services. Meanwhile there was an explosive growth in digital payment methods including digital wallets, bank transfers, app-based banking, and others. Banks in India and other developing countries gained millions of new customers. Surveys found that over 53% of the customers prefer contactless payments. Fewer outlets transact in cash. Familiarity with digital remittance methods increased rapidly during COVID-19. Consumers discovered the convenience and cost advantage of digital remittances. Millions of overseas workers now prefer to send money online over any other method. In terms of consumer experience, security, and speed of transactions, digital MTOs offer services far superior to physical store competitors.

Growth in global remittances

The adverse economic impact of COVID-19 has been far smaller than expected. In April 2020 the World Bank predicted a 20% decline in remittances to low and middle-income countries (LMICs). Recent data shows that the actual decline was only about 1.6%. Several factors contributed to this. The fiscal stimulus in many host countries cushioned the fall in economic conditions. A shift to digital and formal channels helped. For 2021 the World Bank has projected that remittances to LMICs will grow by 2.6% in 2021, followed by 2.2% in 2022.

Some regions have fared better than others. For example, remittances to India from the Gulf declined more sharply, compared to inflows from the US, which remained more or less stable. Migrant Indians send money to India to the tune of $83 billion annually. Notably, Indian expats in the US and EU are predominantly in skill-based jobs. By comparison, those in the gulf are largely engaged in blue collar work. The sharp fluctuations in global oil prices have contributed to large scale job losses and changes in migration trends. It shows that some sectors of the economy are more prone to crises than others. There is a growing trend in favor of skill-based migration.


Some of the financial trends are being shaped and supported by governments. Cash-based channels have thrived in countries where cash dominates, and the economy lacks banking infrastructure. There are more than 1.3 billion unbanked people in the world. Half of them live in just 7 countries. These are also the world’s top remittance recipient nations. Governments are actively working toward strengthening the digital banking infrastructure; more so since COVID-19. A bigger slice of remittances sent via digital and formal channels is good news for regulators. The ongoing climate has created a willingness to deregulate. Governments are more willing to allow more private players to enter. This can facilitate competition and reduce costs for consumers.

IMF Managing Director Kristalina Georgieva said in April 2021 that, “efforts are underway to improve cross-border payment systems”. She expressed the need for shorter payment chains, faster transactions, and more competition among remittance providers. This would greatly benefit vulnerable people who send small value remittances. There is also increased support for central bank digital currencies and privately issued stablecoins at national and international platforms. These could well shape the future of the remittance industry.

In summary

After the initial economic shock, global remittances are bouncing back. Remittances are strongly going digital. Every major opinion poll since the start of COVID-19 has shown a declining reliance on cash and stronger adoption for digital alternatives. KYC processes have become easier and faster. Governments are more supportive of private players. The climate is ripe for fintech innovations and their widespread adoption. Many of these trends indicate a long-term shift in consumer preferences.