How to Keep Remittance flowing?

The global remittance industry has taken a major hit due to Covid-19. In the wake of the post-pandemic era, it is important to investigate the course of action to get remittance flowing again. In 2019, remittances reached a record high of USD 554 billion, overtaking Foreign Direct Investment (FDI) flows to Low and Middle-Income Countries (LMICS)–(bookings institute). However, in 2020 the economic crisis caused by the Covid-19 pandemic was expected to lead to a 20 percent decline in migrant remittance flows to Low and Middle-Income Countries. Such a decline would be sharper in poorer and fragile countries. The resilience of remittance flows is remarkable. Remittances are helping to meet families’ increased need for livelihood support in their perspective countries (DhilipRatha – lead author of the report on migration and remittances and the need of KNUMAD). With such declines in the remittance flows, it is only relevant that we discuss ways to keep remittance flowing in current times.

Firstly, it is essential to invest in digital solutions relating to international money transfers. To encourage the use of digital remittance channels, there are a few issues that need to be rectified first-the most critical being the issue of ‘know-your-customer’. It is feasible to use digital technologies and advance adequate and appropriate, risk-based know-your-client (KYC) requirements. That could help address ‘’de-risking’’ by correspondent banks that continue to affect access to bank accounts for money transfer businesses operating in smaller and poorer remittance corridors. The regulations in many countries to open a digital account in a mobile app these days require a physical ID and customer signatures. During the post covid era with the concerns of health and safety risks, allowing electronic signatures for low-value transaction accounts, would not only reduce compliance costs but would enable migrants to use the service more easily. Additionally, the improvement of Financial Technology (FinTech) has brought about a huge improvement in global remittance. FinTech is the technology that delivers financial services through software, such as online banking, mobile payment apps, or cryptocurrency. The growth in FinTech and digital tech is one of the ways to keep remittance flowing. The expansion and improvement of Financial Technology will improve money transfer services around the globe, making them more efficient and cost-saving. Here at Lotus Remit, we make sure to keep up to date with the current financial and digital technology to give our clients the best possible experience.

Furthermore, it is important to foster a conducive remittance policy and regulatory environment. Remittance should be supported by a proper legal and regulatory framework that will lower remittance costs and improve formal channels of cross-border transactions. An effective regulatory framework should balance innovation and risk during the transition. Governments should become more vocal in advocating the digitalization of wage payments, which would avoid precarious in-person transactions and result in time and cost savings (Asako Okai-UN Assistance and Secretary-General and Director, UNDP Crisis Bureau).

Moreover, it is necessary to increase the flow of human mobility. Migrants represent 3.5 percent of the world’s population but contribute an equivalent of 10 percent of the Gross Domestic Product (GDP). As the pandemic has restructured mobility and migration, it is imperative that we mobilize the international community along with the public and private sectors to revise human mobility, as suggested by UN Secretary-General -(Antonio Guterres). The government and private sectors should synergize to create systems that will not only keep remittances flowing but also build resilience for economies to face a future crisis.

In conclusion, it is important to reinvent the ways to keep remittance flowing especially during the endemic. There are many ways to keep remittance flowing and a few of them are stated above to investigate. Implementing these measures and the broader calls to action mentioned above it would be best to work in an effective, coherent policy and institutional framework. The framework should be designed to reduce remittance costs and increase the volume of remittance flows. Aside from that, it should also support the international remittances agenda such as including innovation in the global remittances market and so on. At Lotus Remit we are focused on giving our clients the best possible experience alongside implying measures to keep remittance flowing.