The 2020 global pandemic brought about numerous changes in the international money transfer landscape.
Payment channels and money transfers in the UAE and across the world evolved to meet customer demand from different parts of the world and constant threats of the COVID-19 virus.
Although restrictions have eased this year, you can still expect some changes in the money transfer industry. Some trends from 2020 are likely to stay but may be modified to meet the new demands of customers.
Money Transfer Trends for 2022 and Beyond
Below are the key seven trends currently shaping the international money transfer industry:
1. Remittances can rebound to pre-pandemic levels
Although migrants from different parts of the world continued to send remittances last year, there was a dip in numbers due to the economic impact brought about by the pandemic.
The upside is that the slump was not as huge as expected, with several countries still receiving high remittance inflows, including Mexico, Bangladesh, Pakistan, Philippines, and Sri Lanka. This can be attributed to the fact that crises make people more determined to provide support to their loved ones.
Because of this, migrant workers continue to work hard even during the pandemic in order to earn money for their loved ones.
And with economies opening again and restrictions easing a bit, remittances from overseas workers, particularly those in countries offering high pay packages, could go back to pre-pandemic levels.
Additionally, with demand for funds from developing economies remaining high, remittance performance at the end of the year could even return to pre-pandemic levels.
2. More affordable money transfer services
In the past, transferring money was usually arduous and costly. This is due to the seemingly endless chains of mediators, paperwork, and hidden charges.
However, changes in the remittance industry have helped customers and businesses enjoy faster, more affordable, and value-added money transfer services.
The costs involved in transferring money have fallen as a result of healthier competition. Moreover, there are also several bodies paying particular attention to and regulating the remittance market since it is a popular option among low-wage foreign workers who need to send money to their families abroad.
Aside from compassion, foreign remittances play a crucial role in the economic development of emerging markets. Because of this, authorised regulators monitor and control money transfer fees to encourage customers to continue using services and contribute to their home country’s financial growth.
3. Faster receipt of remittances
Since technology makes it easier and faster for people to send money domestically and internationally, they can also expect to receive it just as quickly.
The trend of faster money transfers has boomed with the introduction of various apps that make this possible. Interoperability plays a crucial role as well.
Interoperability allows different information technology systems to exchange data with each other.
Many tech companies have already paved the way for and enhance interoperability within financial institutions. Because of this, nearly all people can expect the real-time receipt of money wherever they are.
This trend benefits individuals who send remittances for personal reasons and businesses who use the service regularly. For instance, employers can send remote workers their salaries wherever they are at any time. Employees can also receive them in the shortest time possible.
Additionally, employers can immediately reimburse remote employees for expenses.
Lastly, companies that pay suppliers through money transfer can negotiate for better terms and request early-pay discounts, helping them save money on their supplies.
4. The push to go digital
This year, there will be a more urgent need to come up with and implement solid strategies to help traditional money transfer operators (MTOs) adapt to the digital push of 2021.
The most significant trend you can expect is a mass migration into the digital realm. This is especially applicable for small to medium MTOs since they have the flexibility to adopt digital solutions as the money transfer industry continues its recovery.
On the other hand, medium to large money service businesses (MSBs) are likely to downstream their activities. Most of these institutions are hoping that this year, they can increase their access to expanding pay-out networks and digital platforms, such as mobile and e-wallets.
5. Data-driven opportunities
Going digital with money transfers creates an abundance of data and opportunities that can deepen customer engagement and business efficiency.
With numerous advancements in artificial intelligence (AI) and data analytics, MTOs can turn data into valuable insights that give them a competitive edge. These include using the collected information to create targeted and contextual offers to increase their customer base.
Access to more data also allows MTOs to develop other services that customers will appreciate. Examples of these are automated identification and real-time transaction scanning.
6. Establishing partnerships
This year, MTOs are likely to work more with fintechs to discover ways to improve their tech- and data-driven services.
These two sectors will pool their resources and explore solutions related to compliance, customer service, and other key processes.
MTOs will be more open to collaborating with other businesses since everything is almost modular. Also, smaller companies are aware that somebody else can always do one thing better at a more affordable rate.
You can also expect the different constituents of the financial sector to start working together and forging deeper connections to benefit from greater transparency, lower costs, and more innovation.
7. Continuous search for de-risking solutions
De-risking, which is also called de-banking, is the practice of financial institutions of restricting or terminating business relationships with clients that they perceive as risky.
Although this banking strategy has helped various banks and financial institutions, many MTOs and other remittance companies have been severely affected by it.
This year, financial experts anticipate MTOs to work with banks to have a more efficient working relationship in terms of remittance processing.
For one, banks may require MTOs to pass adequate anti-money laundering and counter financing of terrorism (AML/CFT) regulations. They may also ask for evidence for proper enforcement practices.
This solution can help mitigate the negative effects of de-risking and MTOs to provide more efficient money transfer services.
This year, MTOs are focusing on winning customer trust and engagement and providing a variety of money transfer options.
Moreover, they will optimise technology to reconcile transfers and observe and manage customer trends.
All these strategies and practices allow MTOs to provide customers with efficient and reliable services.