The effect of COVID-19 on Global Remittances and money transfer companies

Updated on: 2020-07-19 - 3 mins read

The effect of COVID-19 on Global Remittances and money transfer companies

Covid-19 has impacted the world economy in a severe manner. With closed gates all over the world, people cannot travel and so the money.

India being the major in the sector of foreign remittances, expected it to fall by approx. 23 per cent in 2020 to $64 billion. In 2019, Total remittance around the globe was $573 Billion. As per KNOMAD ( and Worldbank data, remittances is expected to slump by 20% that is approx. USD110 Billion. India was the top recipient of remittance with $83 billion that is approx. 12-14 per cent of the world’s total remittance.

Impact of COVID-19 on Global Remittances

With Covid-19 affecting jobs and lives of millions of people, global remittance and hence the economy has taken a severe hit. Along with the loss of income, the high cost of sending large amounts of money across the globe have been a deterring factor for remittances.

The World Bank ( states that remittance flows are expected to take the biggest hit in different parts of world with following statistics:

  • South Asian remittances, one of the highest across the globe, are expected to drop by 23%, which is equivalent to US$32 Billion as India contributes most of remittance part in that region
  • 28% decrease in Europe and Central Asia, equivalent to US$16 Billion
  • Sub-Saharan Africa, which notably includes a large amount of intra-continent money transfers, is set to witness a 23.1% (~US$11 Billion) decline in remittances.
  • East Asia and the Pacific region are expected to see the lowest drop at 13% (~US$19 Billion)
  • 19% (~US$19 Billion) drop is expected for Latin America and the Caribbean
  • The Middle East and North Africa region is set to experience a 20% drop, US$12 Billion
Impact of COVID-19 on global remittances_WorldBank_KNOMAD

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Impact of Corona Virus Pandemic on India

Remittances from non-resident Indians (NRIs) have been helping Indian economy in financing its current account deficit (CAD), even in times of a crisis. The 34% growth in remittances to the country in 2008, when the financial crisis broke, reflects this reliability. Every year a huge part of Indian population migrates to some other country for employment and their money transfers contribute to Indian economy by appreciating currency. But, due to corona virus pandemic, remittances to India is expected to drop by 23% from 2019 which is equivalent drop from US$83 Billion last year to US$64 Billion in 2020.

Remittance inflows to India from 2008 to 2019

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K.R.Bijimon, Chief General Manager, Muthoot Finance, said,”Covid-19 pandemic and resultant lockdown drastically affected remittance business due to job/income loss and exchange houses not functioning. Few considerable points to evaluate the effect of pandemic on Indian remittances are as follows:

Effect of Oil Prices:

For India, the threat to remittances is worse than ever as more than 50% of the remittances come from the Middle East region. These economies are built on oil revenue and the recent plummet in crude oil prices had affected them a lot. Indeed, this increases the risk of layoffs, and immigrants are more vulnerable. More than 3 lakhs NRIs from Middle East opting to return to Kerala and embargo on new job visa by US Govt. suggest that COVID 19 impact is likely to have a long-term impact on remittance business. However, positive side of falling crude prices is a decline in the country’s oil import bill. So, it will not add much into Current Account Deficit. The average price of India’s crude import was down by 39% in March, and crude oil prices have continued to decline further. Even so, decline in oil price’s positive effect is less as compared to negatives on remittances

Volatility in Foreign Direct Investment (FDI):

During Covid-19 Pandemic foreign portfolio flows in domestic equity and bond markets has been very volatile. At such a time, it is important that the most reliable and steady source of inflows, remittances, should be robust. “Global Pandemic has resulted in loss of employment and wages of migrant workers and, unlike the past crisis, remittances may not provide counter-cyclical support this time around,” added the analysts at Nomura, financial services group and global investment bank (

NRI Deposits:

Another impact of pandemic on remittance can be NRI deposits. So many migrant workers lost jobs, facing pay cuts. Since Indians will be earning less or perhaps stop earning, the flow towards these NRI deposits could diminish. By extension, this could impact the deposit growth of banks, especially for those that rely on NRI deposits.

Considering few major reasons, In the coming months, slowdown in remittances could emerge as a key pain point for the Indian economy.

Impact of COVID-19 on International Money Transfer Companies:

Positive Impact:

Although there is halt on traditional transfers from the banks by physically visiting them, online money transfer companies have experienced a boom in digital transactions. A lot of people have been opting digital transactions and these companies have reported a tremendous growth in user base and market. MoneyGram Reports 100 Percent Digital Transaction Growth in May. Western Union Continues to Expand Digital Services and Account Payout During COVID-19 Pandemic; Now in 75 Countries with Payout in 200 Countries Globally.

Negative Impact:

Unfortunately, due to the crisis caused by the pandemic, money transfer companies have fallen on some bad times. Even top leaders like InstaReM and TransferWise struggle because of the reduced flow of transfers. These companies largely depend on small businesses providing international services, which are failing at an alarming rate.

The other major group of customers for money transfer companies is small property investors. Reduced transfer fees made it possible even for people who wants to buy property abroad which sometimes help to get boost in tourism industry. However, with travel restrictions and lockdown in many countries, the hospitality sector has been hit greatly. So, global remittance providers have lost majority of these customers.

However, money transfer industry is very promising. It will revive very soon as they will get their customer traffic back. Also, businesses that expand to online banking on top of offering international transfers have a better chance. Those are already in high demand as the world is going digital even faster than before.

Global Money Transfer companies

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Our View:

The global economy and remittance have taken a wild blow, but with time everything will start recovering. On the other hand, online money transfer companies, and neo banks seem to be the future of fintech. Pandemic has given remittance companies an opportunity to grow digital services, reduce transfer fees and transfer time.