Money transfer volumes fall by just 1.6% during COVID, but sending costs remain high
If there’s one sector that the pandemic hasn’t slowed down, it’s international money transfers (IMTs). New research from the World Bank reveals that the volume of global remittances fell by only 1.6% over 2020, despite initial forecasts that it would plunge by 20%.
Remittances (payments or cash gifts) sent to low and middle income countries hit US$540 million last year according to the World Bank’s latest Migration and Development Brief, sitting just US$8 billion below the 2019 total.
The World Bank said a number of factors helped to bolster the flow of overseas money transfers over 2020. This includes government stimulus introduced in countries with migrant workers, as well as a shift from cash to digital and from in-person to formal channels while people stayed at home.
For instance, IMT fintech Azimo (which currently operates in Australia, the UK and Europe) saw their number of new customers increase by more than 50% during the lockdown periods.
Azimo’s chief executive officer, Richard Ambrose said the huge volume of remittances, even during such an financially challenging year, proves how essential this service remained for many people.
“Our customers will often cut their own personal spending so that they can keep sending money home to their families when times are tough. The strong global remittance volumes during 2020 are a testament to their resilience and spirit of sacrifice,” he said.
“The main reasons for remittance payments are for regular expenses like food and rent, as well as less regular ones like school fees and medical bills. Those reasons have persisted during COVID, but we’ve heard from our customers that they felt a heightened need to send money home to relatives who were struggling with the economic and health effects of COVID.”
Remittance growth set to continue
With the future looking far brighter for the global economy, the World Bank has predicted that international money transfers to low and middle income countries will rise by 2.6% to US$553 billion in 2021 and by 2.2% to US$565 billion in 2022.
Ambrose agrees with this optimistic outlook.
“We expect remittance volumes to stay strong over the next year as developed economies open back up after lockdowns and some migrant workers return to their adopted countries,” he said.
“In fact, quite a few developing country currencies have lost value during the pandemic, so there’s an added incentive for workers to move abroad and send money home.”
In fact the federal government announced under its latest Budget that Australia could open up its borders by mid-2022, with the focus being to bring migration back to pre-pandemic levels.
How much does it cost to send money overseas?
The global average cost of making an international money transfer remains high, sitting at 6.38% over the first quarter of 2021, according to the World Bank’s latest Remittance Prices report. This is based on calculations of sending US$200 overseas.
While this is a slight drop from the previous quarter (by 0.13%), it’s still more than double the Sustainable Development Goal (SDG) target of 3%. For context, the SDGs were devised by the United Nations in 2015 as a “blueprint to achieve a better and more sustainable future for all” by 2030.
South Asia continues to be the lowest-cost region to send money to (4.64%), while sub-Saharan Africa remains the most expensive destination region (8.02%).
Then what’s the cheapest way to send money overseas? It may pay to look beyond the banks, as the World Bank says they are still the most expensive type of IMT provider, with an average cost of 10.66% in the first quarter of 2021. That’s an increase of 0.15% since a year ago.
Meanwhile, money transfer operators (MTOs), which include both traditional providers and newer fintech players that specialise in IMT, were one of the most affordable options. World Bank figures reveal their services cost 5.43% on average in Q1 of 2021 - or 0.57% less than a year ago.
Interested in comparing your IMT provider options for a range of currencies? Head on over to our international money transfers comparison table to get started today. You can also check out our country guides for more details on how to send money to different destinations around the world.