3, 2, 1…..and just like that a decade comes to an end. However, 2020 promises to ring in countless business opportunities. The rapid and exponential evolution of the remittance industry in the past year across geographies will play a pivotal role in channelling growth in 2020. As we stand on the threshold of a new year, here’s a recap of how the remittance industry performed in 2019 and a forecast of growth trends for 2020.
Remittance marketsLooking back at 2019, we could say that remittance flows around the world were buoyant. Since the last few years, the industry is rapidly changing and, this shift began when digitised money transfer methods gained acceptance worldwide. Despite being susceptible to market vulnerability – such as economic headwinds, migration policies etc. – the increase in remittance flows was more significant in some countries than in others.
In the Eurozone (which includes Germany, France, and Italy) a notable deceleration was seen due to cyclical economic factors. Additionally, declining prices of hydrocarbon energy also affected the growth rate. The Middle East and North Africa were affected by various structural reforms like the introduction of VAT and localisation of the labour market. The US is expected to record a 2.2% growth rate in 2019, which is a 0.8% fall from 2018. In terms of USD, five countries that flourished with inbound remittances were India, China, Mexico, the Philippines, and Egypt. The growth rate of remittances to these nations is estimated to be between 7% –12% as of 2018.
In 2018, inward remittances contributed to almost 10% of the GDP in the Philippines as a majority of the country’s expats are in Qatar, the UAE, Singapore, Japan, and the US. This growth was also facilitated by the Philippine government, which publicly appreciated the financial contributions made by expats abroad by implementing financial awareness programmes, and upheld the resolution of the ‘International Day of Family Remittances’. Regions such as Latin America and the Caribbean (LAC) and sub-Saharan Africa (SSA) also experienced a positive growth this past year. Remittance flows to SSA and South Asia have grown slowly but steadily to touch 5.1% and 5.3%, respectively.
Remittance trends
The World Bank estimated global remittances to reach US$ 715 billion by the end of 2019. It is estimated that 272 million people have moved to work outside their home country. Over 800 million people are solely dependent on the remittance income sent back home by their loved ones.
A significant fall in the average remittance fee rates, i.e. from 10% to 6.82% (as of Q42019) has allowed expats to send home a substantial portion of their income. Money sent by expats to their home country has become a significant source of external aid, and an essential element of economic growth for many developing nations.
Global remittances witnessed a robust 10% growth in 2018 to US$689 billion, which included US$528 billion to LMICs (low- and middle-income countries). Remittance flows to LMICs are expected to reach US$551 billion by 2019, rising by almost 4.7% when compared to the previous year.
Remittance outlook for 2020
Transformation has been a constant within the remittance industry in 2019 and is likely to facilitate moderate growth in 2020 as well. As is with any other industry, supply alone cannot rescue a business if demand is lacking. And so, as a new decade unfurls, a modest improvement of 3.4% in global economic growth is predicted for 2020.
Around 40 developing countries in the world are expected to project GDP growth rates above 5%. Of these, 19 countries are from sub-Saharan Africa. SSA is expected to be a hotbed for money transfer organisations in 2020. A World Bank report records remittances in the region grew by a massive 10% (to US$46 billion) in 2018, and the same is expected through 2020. In fact, Pew Research Centre revealed 8 out of 10 fastest-growing expat populations are SSA nationals, who will fuel cross-border remittance flows in the coming year.
The World Bank also estimates the global remittance market to touch US$746 billion in 2020, at a growth rate of 4.5%. Countries like India, China, Philippines, Mexico, and Nigeria are expected to receive a majority of the remittance share, just as in the previous years. However, global economic uncertainty could potentially affect the remittance market in 2020.
Last words
Over the last few years, the remittance industry has introduced digital innovations to cater to the needs of its evolving customers. The rampant adoption of mobile wallets and other technologies will play a pivotal role in fostering the growth of the remittance industry.
Money transfer organisations such as Xpress Money are looking to bring in competitive pricing and greater transparency to be in – sync with the targets set by the UN’s Sustainable Development Goals for 2030. With the promise of enabling an inclusive community, 2020 is expected to see the remittance industry grow even stronger.
