How COVID-19 made Money Transfers a crucial service?
The global impact of the COVID-19 pandemic has been profound, reaching into virtually every corner of the world. However, its consequences have been particularly severe for those living in poverty in developing countries. These individuals, often already suffering from economic hardships and lacking access to formal government assistance, found themselves in a worst situation as the pandemic unfolded. They faced not only the health risks associated with the virus but also the economic fallout, including job losses and reduced income.
On the other hand, wealthier nations responded with more substantial support systems and social safety nets, providing financial aid and resources to their citizens to mitigate the pandemic's economic shocks.
Despite the devastating impact of COVID-19 on people's lives and livelihoods worldwide, remittances, which are the money sent by individuals working in one country to their families in another, continued to be a vital source of financial support for many poor and vulnerable groups. This money was crucial in helping them meet their increased financial needs during the pandemic.
Surprisingly, in 2020, the total amount of money sent as remittances remained quite strong. It increased in regions like Latin America and the Caribbean, the Middle East and North Africa, and South Asia. However, it declined in regions like East Asia and the Pacific, Europe and Central Asia, and Sub-Saharan Africa. Notably, the drop in Sub-Saharan Africa was primarily due to a significant decrease in remittances to Nigeria, without which the overall regional remittances would have shown an increase. This information comes from the World Bank.
Why Money Transfers were crucial during the pandemic time?
1. Financial Support in Crisis
Loss of Income: Many individuals and families experienced job losses, reduced work hours, or business closures due to the pandemic. This resulted in a significant reduction in their income.
Economic Hardships: The economic impact of the pandemic caused financial hardship, making it difficult for people to cover basic expenses such as food, housing, and healthcare.
Government Relief Programs: Governments in various countries introduced relief programs to help their citizens cope with the economic fallout of the pandemic. These programs often involved direct cash transfers or financial assistance.
Family Support: Money transfers allowed family members working in other regions or countries to send financial support to their loved ones affected by the crisis. This support was essential for meeting immediate financial needs and ensuring the well-being of family members.
Emergency Aid: Some individuals or organizations used money transfer services to send emergency aid to communities in need. This aid was crucial for addressing urgent financial challenges in the wake of the pandemic.
Remittances: For many, remittances became a lifeline. Workers in foreign countries continued to send money back to their home countries to support their families, even when facing job insecurity or health risks abroad.
Charitable Donations: Money transfer services facilitated charitable donations, enabling people to contribute to relief efforts and support those in need during the crisis.
2. Digital Accessibility
Social Distancing Measures: The pandemic led to widespread social distancing measures, including lockdowns and restrictions on movement. These measures made traditional in-person financial transactions less convenient and, in some cases, unsafe. People were encouraged to limit physical interactions, leading to increased reliance on digital alternatives for various services, including financial transactions.
Reduced Use of Cash: To mitigate the risk of virus transmission through physical currency, people began to avoid using cash whenever possible. This shift in behavior accelerated the adoption of digital payment methods, including money transfer services. These services allowed individuals to send and receive money without handling physical cash, reducing potential exposure to the virus.
Remote Work and Income: Many people transitioned to remote work during the pandemic. This shift required digital tools and platforms for various tasks, including receiving payments. Money transfer services, often available online or through mobile apps, allowed individuals to receive their income without visiting physical workplaces, aligning with the remote work trend.
Convenience and Speed: Digital money transfers offered a convenient and fast way to send and receive funds. As the need for financial support and emergency aid surged during the crisis, the quick and efficient nature of these services made them an attractive choice for many.
Contactless Payments: Contactless payments, which include digital money transfers, gained popularity as a safer and more hygienic alternative to traditional payment methods. This was particularly important in situations where people needed to make purchases or send money while minimizing physical contact with others.
Mobile Access: The widespread availability of smartphones and mobile internet access made it easier for people to use digital money transfer services. Mobile apps provided a user-friendly interface for sending and receiving money, making financial transactions more accessible to a broader audience.
Financial Inclusion: Digital money transfer services played a role in financial inclusion, allowing individuals who may not have had access to traditional banking services to participate in the digital economy. This expanded access to financial services was particularly valuable during the pandemic when financial assistance and relief programs were often delivered electronically.
3. Economic Vulnerability
Low-Income Individuals: The economic impact of the pandemic hit low-income individuals the hardest, pushing them further into financial hardship. Money transfers helped bridge the gap and meet their immediate financial needs.
Basic Necessities: Money received through these services often went towards essential expenses, such as groceries, housing, and healthcare, helping vulnerable groups survive the economic challenges.
4. Global Assistance
International Dependency: In many countries, remittances from family members working abroad constitute a significant portion of the national income. These funds continued to flow, providing crucial support for both individuals and the broader economy.
5. Health and Safety Concerns
Touchless Transactions: To reduce the risk of virus transmission, people shifted away from handling physical cash. Money transfers, being digital, allowed for secure and touchless financial transactions.
6. Business Adaptation
Informal Sector: Many small businesses, particularly those in the informal sector, had to adapt to pandemic-related challenges. Money transfer services facilitated sending and receiving payments, enabling these businesses to continue operations despite restrictions.
7. Humanitarian Aid
Efficient Distribution: Humanitarian organizations used money transfer services to efficiently distribute aid to affected populations. This ensured that relief reached those in need, helping communities weather the crisis.