International money transfers to plunge 20%, but still ‘vital’ amid COVID-19
COVID-19 has left no corner of the global economy untouched, with one forecast revealing the international money transfers industry won’t come out of this pandemic unscathed either.
Last month, the World Bank predicted global remittances could fall by a staggering 20% in 2020.
The projected drop - the steepest in recent history - is mainly due to a loss of income and employment among migrant workers who can no longer afford to send money back home.
According to World Bank Group’s president, David Malpass, the economic crisis caused by the coronavirus is cutting off a “vital source of income for developing countries.”
“Remittances help families [in the poorest communities] afford food, healthcare, and basic needs,” he said.
The World Bank expects money sent to low and middle-income countries to decrease by 19.7% to $445 billion this year.
It’s a grim turn of events since 2019 when transfers to these countries hit a record high of $554 billion.
Founder and chairman of Europe-based online money transfer service Azimo, Michael Kent said the World Bank’s findings aren’t surprising.
“There’s no doubt that the market for remittances will decline. If people have less money, they send less money. Everyone’s going to feel a little bit poorer at the end of the year than they felt at the beginning of the year,” he said during a webinar hosted by cross border payments network IAMTN last week.
Less access, more need
While money transfer services have become harder to access not only for many migrants but also for those feeling financially strapped, they remain more essential than ever.
TransferWise Australia’s country manager, Tim Cameron said people need to send money to help loved ones, and to pay their bills overseas.
“We have supported some people in their move back home, and others in managing their businesses across markets entirely online, from home,” he said.
With online IMT providers like TransferWise or Azimo, there’s no need to make a physical trip to a remittance centre or a bank with documents and cash. Instead the whole money transfer process can be done digitally, without breaking self-isolation.
Cameron said that in TransferWise’s case, business is still doing well despite COVID-19.
“We’ve seen some fluctuations [in transfer volumes] related to the global situation, but overall things are looking healthy,” he said.
The Australian Financial Review reported that in March when the coronavirus was first declared a pandemic, the company saw a 17.5% increase in new users signing up to its service globally, compared to its forecast.
Likewise, Azimo recorded a “huge surge in new customers” after an initial decline in transactions in the first few weeks of lockdown.
According to Kent, the amount of people sending money via the Azimo platform has now risen by 100% year on year.
However, he noted that these customers are also transferring about 10% less per transaction - a trend that could indicate “people have potentially less money to send.”
How to save on your money transfer
With money being tighter than usual, it pays to shop around for a competitive deal when making your international money transfer.
Whether you’re sending emergency funds to loved ones abroad or paying for business supplies from overseas, here are a few quick tips to help you save some dollars here and there:
1. Calculate the total transfer cost:
This includes the exchange rate on offer and any fees that apply. In particular, look out for any nasty surprises in the final cost. Cameron says terms like “0% commission” or “free transfers” are red flags.
“You will often find that a margin has been added to the [real] exchange rate which translates into a hidden fee,” he says.
2. Set up a rate alert tool:
To help you keep track of your target currency (or currencies), many specialist IMT providers offer this nifty feature which notifies you via email or text when your desired exchange rate has been hit.
“When it does, you can quickly take advantage of this opportunity to send money abroad,” says Cameron.
3. Browse award-winning providers:
Our 2020 Mozo Experts Choice Awards for International Money Transfers are also a great place to start your search.
As part of these awards, our team of expert judges analysed 30 different money transfer services in order to find the best of the best. They looked at which ones offered the most competitive exchange rates and fees around.
For a full list of winners, check out our Mozo Experts Choice International Money Transfers Awards page.
Or weigh up even more options over at our international money transfers comparison table.