COVID-19 has changed life as we know it, affecting every aspect of our personal and professional lives. People all over the world are adapting to the ‘new normal’.
Parents and children are adapting to online learning tools, business owners of remote technologies, virtual services and business delivery systems are seeing a boom, and small businesses are struggling with the economic impact of shelter in place orders. With the pandemic drastically changing the global socio-economic landscape, it’s important that businesses seek out newer solutions to keep their day-to-day operations going.
One of the areas that’s integral to any business around the globe is payments. In this article, we’ll look at the current landscape of the remittance industry and the ways your business can keep up by adjusting your cross-border payments strategy.
A Move Towards Digital Remittances
2019 and the beginning of 2020 showed an initial spike in global remittances. In 2019, global remittances were estimated to be a $550 billion market .
However, this initial spike has shifted drastically. According to the World Bank, “Global remittances are projected to decline by about 20 per cent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.”
In an additional study performed by Mckinsey & Company, they indicate a drop in global remittances by 8-10%. The state of remittances will largely depend on the spread of the virus, how long stay at home orders will be in place, and the actions of governments around the world .
The need for online, digital payments has drastically increased, despite the drop in overall global money movement. “COVID-19 is hastening the move online for remittances,” said Paul Byrne, Dublin-based CEO of CurrencyFair, “Because people can’t go out, there is a huge move to digitise remittances .” Virtual banks, access to digital wallets, and payment digitisation may lead fintechs providing remittance services to the front lines as going into physical banks and exchanging physical currency will not be an option for most people.
In this article, we’ve outlined some potential ways the payments and remittance industry could help you and your company prepare better for the ‘new normal’.
Prepare for the Future
Now is the Time to Transform Legacy Payment Systems
Now is the time to look at legacy payment systems and re-evaluate for efficiencies. Looking at potential structural and technological improvements to push your business forward is essential to plan for the future. According to the study referenced above by Mckinsey & Company, “Payments-as-a-service business models, in their infancy before the crisis, are likely to get a boost, particularly where they can provide relief for reduced IT budgets”. Looking into technologies like this is important to improve your back-office operations or to scale with new or enhanced payment products to bring to market.
Digitising Your Business
Making payments by physically going into banks has been put on hold. Cash and cheques are on the decline and banks are closing their branches to keep their employees and clients safe. This trend will most likely not end when the pandemic has slowed down. Using this time to adopt digital payments and promote remote buying will help keep your business competitive, increase sales and provide better visibility into operations.
Ensure Payment Accessibility for All
When going digital, it is vital that all people have access to new and emerging technologies. Digitising payments can potentially exclude unbanked and underserved customer segments. In a report conducted by World Bank in 2017, there were 1.7 billion unbanked adults worldwide, most coming from under-developed regions in Africa and Asia. It is important to keep these individuals in mind when digitising as the world becomes more remote .
Using payments technology that is accessible on mobile devices, including options to pay with mobile wallets and accepting digital currencies, will allow your business to foster payment inclusivity while accessing new markets. Thinking of these customers or suppliers when re-evaluating your payments strategy will help you shape a digital experience that serves all segments.
Enhance Digital Payment Capabilities for Ultimate Transparency
Digital wallets should be used for more than just making payments. Enhancing your technological offering to include analytics, virtual cards and virtual card numbers (VCNs), merchant category restrictions, mobile apps with integration features, etc., will help you stay ahead and competitive. Payments technology that includes additional features like the ones we just mentioned will ensure your payments process is ahead of a game which is constantly evolving.
Take Another Look at Compliance
Because of the current landscape, digital businesses are seeing an explosion in growth as consumers are ordering more online. However, they are also seeing a huge jump in payments fraud. To combat this, it is vital to have the proper securities, data privacy and compliance measures in place to combat this surge. As phishing schemes and online fraud will only continue to grow as payments are forced online, re-evaluating payment securities to protect your business, customers and suppliers will be a priority.
Although times seem uncertain, staying ahead of what the future of the payments and remittance landscape could look like is important. Implementing these strategies will help your business stay relevant in what could be an ever-growing remote world.