COVID-19 is a pandemic disease that has created a severe outbreak globally, starting from China to almost every country. It has a major impact almost on everything, including human life, the world economy, the automotive sector, the industrial sector, consumer electronics, security and surveillance, and others. As a result, demand and consumption rates get lowered. The unavailability of vaccines to cure or prevent the disease from spreading is a major reason why lockdown has been initiated to avoid and reduce the COVID-19 spread. In order to control the disease spread, lockdown is considered the better solution observed in many countries, but it also has an adverse effect on the economy. At the height of the pandemic, more than 2 billion people were under some form of lockdown, and 91% of the world’s population, or 7.1 billion people, live in countries with border controls or travel restrictions due to the virus. However, now almost every country, the factories are starting to reopen by taking some prevention such as 20% -50% employees on the field, social distancing, extreme hygiene measures, and others to support the economy. It is supporting the economy and helping to lower the recession rate at a certain level.
As the pandemic hit globally, people are becoming more inclined and reliable towards using digital platforms and internet services. With the spread of the virus globally, individuals are avoiding physical contact to protect themselves from the virus. Individuals prefer e-commerce more than physical shopping in stores which will change the behavior of remittances among the customers. This has eventually created a series of opportunities for the digital remittance market providers.
However, the digital remittance market is witnessing an increase in some sectors like airlines, tourism, hospitals, hotels, entertainment, e-commerce (non-essentials), and restaurants.
The demand for digital remittance is increasing in the coming months as individuals and companies are becoming more reliant on digital platforms and internet services for their requirements due to the virus's spread. Rising incomes and rapid urbanization are vital factors for the prominence of digital remittances. The convenience of digital payments has caught on primarily due to the penetration of smartphones and mobile apps. The supply chain of the remittance market based on an online platform has been disturbed due to the refunds and cashback offered in the e-commerce market. The online purchase is around three times more likely to be returned by the consumer than the physical purchase. About, 23 percent of U.S. purchase has shifted to online retail, with increasing business the rate of return, refund and chargebacks will increase, moreover due to disruption in logistics there must be several other issues of delay. The digital remittance service provider may also get into disputes in these transactions. The customers are likely to involve the refund from the bank directly, which can impact the digital remittance solution provider. Banks need to expand access to digital touchpoints securely and must ensure all-time availability.
Thus, in the COVID-19 times, there has been a surge in the demand and supply of the digital remittance market because of the no-contact benefit that comes with it.
The average cost of remittance services globally should be lower than 3% by 2030. To send remittances for a total cost of 5% or less is given country-to-country corridor. The price impact is negative as the players have worked in pricing very well. Due to the high adoption rate of money transfer and remittance services, the remittance prices are in control. Innovative solutions are already shifting the landscape of remittance services by reducing cost and increasing convenience for senders of remittance. The research proves that digital remittance is just 3.93%, nearly half the cost of traditional remittance. To gain the market share, players will have competitive pricing. The World Bank report states that half of the international remittances currently received in cash in Albania were received via e-money. Beneficiaries could save up to $1.3 million annually, while payment services providers could save up to $6.7 million. The digital remittances index decreased from 5.29% in Q 3 2020 to 5.11% in Q 4 in 2020. More alarmingly, while 55% of the consumers said they understood the cost of sending money abroad, only 18% correctly identified the exchange rate as the transfer cost.
This opens doors for opportunities in the market. In fact, some banks and other financial services providers charge fees for international transfers that are more than twice as high as outlined.
As the COVID-19 crisis continues to expand, makers would possibly face challenges on varied fronts. Producing firms would be searching for immediate measures to keep their workforces safe and their businesses solvent. Makers would conjointly have to be compelled to look on the far side of their economic viability. Because the COVID-19 pandemic intensifies, makers may face continued downward pressure on demand, production, and revenues. They would continuously face cash-flow liquidity challenges and difficulties in managing debt obligations. The pandemic has boosted the growth of the digital remittance market.
The money transfer and remittance industry have always depended on new product development and partnerships to thrive. The money transfer and remittance industry is growing very fast due to technical advancements in services offered by the players and the increase in the adoption of cloud services. The digitalization and rising adoption of smartphones are boosting the remittance market.
During the lockdown, the global digital remittance market has observed a rise in the adoption of digital platforms. Some of the factors like physical distancing, lockdown measures, increased internet services usage, smartphone sales, internet usage, and online shopping are boosting the growth of the digital remittance market. People are increasingly relying on digital platforms and are becoming habitual to digital remittance platforms. Also, governments of many countries were taking various initiatives to boost market growth.