Post-COVID Opportunities in Remittance and Payments – for Money Service Business
Early 2020 people woke up in the morning, kissed their families goodbye, and headed to work. Companies and local shops opened for business at scheduled times, served a market, and closed as usual. The travel and tourism industries were boosting improvements year on year. Global healthcare sectors maintained steady feet overall, governments around the world went about their business and when you and I tune to the news at night, it’s all the same old news.
Barely 4 months into 2020, the norm as we know it changed. ‘Quarantine’, ‘lockdown’, or ‘self-isolation’ kept more people at home and reduced consumer spending. Businesses downsized, or worse, closed down. Travel restrictions were put in place and negatively impacted the global supply chain. Health care systems around the world were surely overloaded and governments spent billions on aid programs and disbursements.
The socio-economic impacts of COVID-19 were felt by everyone, every administration, and every industry – directly or indirectly. This is especially true for the Fintech sector where powerhouses grew weak and several players left the game amidst the pandemic. Even Asia, the continent with the largest boom in Fintech startups over the years, witnessed a dwindle in Fintech investments in 2020.
Yes, the pandemic knocked the global Fintech sector hard in the teeth, but it sure did leave crumbles of opportunities clattering down through the broken structure. While some of these opportunities are magic swings that never existed before, several have always been there for the taking, simply waiting for a big break to highlight their relevance in the marketplace. This column discusses these opportunities with insights into how to harness them and prepares you for the new way of doing business in Fintech post-COVID-19.
Online: The Future of Remittance
Traditional remittance has for years relied majorly on networks of aggregators who serve as middlemen between money transfer operators or payment agents from remitter to beneficiary. The World Bank reports that the presence of aggregators in this value chain accounts for the stubbornly high cost of remittance. Migrants in most cases are forced to pay up to 10% of the value they are sending home. In 2017, the global cost of sending remittances totalled an astonishing $30 billion.
COVID-19 drastically interrupted this network by placing restrictions on person-to-person business interaction. With money transfer shops and banks closed down, people relied on online remittance applications and service providers to send and receive funds. This trend is expected to continue post COVID simply because of the speed of service, low cost, and convenience associated with sending and receiving money online. A news release by Globalwire predicts digital remittance to hit $33.9 billion by 2026!
This presents a massive opportunity for money businesses willing to invest in online remittance software to be in the frontline of satisfying the skyrocketing demand for virtual money transfer.
The rise in Demand for Digital and Specialized Banking Services
One of the long talks within the banking industry pre-pandemic is ‘becoming digital’, yet less than 15% of the traditional financial institution has moved 75% of operations and services online. A large part of this movement spurred from Fintechs – in the form of neo-banks, mobile banks, online banks, insurtechs, Robo-advisors, stock trading apps, P2P lending/crowdfunding platforms, payment gateways, cryptocurrency wallets, and many others – who entered the banking game, competing with traditional banks for different market shares. By specializing in one or more services traditionally offered by banks, Fintechs were bound to break apart an industry primarily dominated by financial powerhouses.
COVID-19 hit traditional banking in the face and showed the world what the future of banking would look like. All of a sudden, organizations were forced to provide digital alternatives to their services, existing banking Fintechs enjoyed exponential growth, and organizations who couldn’t move operations online lost.
This trend is not going away anytime soon. More individuals and businesses are digitizing their banking, post-COVID, because of its advantages. Clients enjoy specialized and personalized banking services from digital banks that can employ state-of-the-art technologies in analyzing clients’ data and understanding their specific needs. Not to mention the speed of service, convenience, lower fees, and digital assets so beloved by clients – the time for businesses to invest in providing digital banking services is now.
Explosion in Digital Bills Payments
Even before the pandemic, 3 out of 10 persons living in any city must have paid bills digitally. COVID-19 further expanded the field for digital payments to surge. In the heat of the pandemic, cash limitations in ATMs followed by widespread discouragement of cash transactions as a safety/hygiene measure led to the explosion of digital alternatives for payments.
Fast-forward to the dwindle of the crises and we are still witnessing a steady decline in the use of cash and increasing demand for digital payments. Businesses who key into this trend by providing customers with efficient digital payment solutions would undoubtedly thrive in the new digital economy. Whether you are a merchant, a biller, a service provider, or a money transfer operator, if you fail to incorporate cashless payment methods into your business, the business wouldn’t survive in the coming years.
As with any global crisis having major economic impacts, COVID-19 created a disparity among businesses. Some firms emerged stronger than before, others weaker, and a few maintained the status quo. While several industries suffered during the pandemic, the majority of the world’s ‘movable’ wealth at that time was transferred to the healthcare sector, online businesses, manufacturers of protective gear, and suppliers of raw materials. The stock market wasn’t spared either. COVID-19 ripped apart the Chinese stock markets with spillovers on other Asian, European, and American markets. Several top-performing stocks around the world came crashing like stacks of cards.
This entire scenario presented opportunities for businesses even in 2021. Now more than ever, you can buy stocks that were once at a record high, for less and hold for an upturn in the economy. While major stocks have revived significantly, that of airlines and travel companies are still tanked below the value they were in 2019. Then there are mergers and acquisitions to consider. We expect to see a lot of buyouts or mergers in the coming years as businesses struggle to survive.
For you as a business operating post-COVID, perhaps this is the best time to move on weaker competitors or join forces with players of the same strength as your business. However, it is important to bear in mind that certain investments in the form of acquisitions might take some years to pay off. Experts predict that it would take a couple of years for the world of commerce and finance to fully recover from the impact of COVID-19.
The best part of all of this is how easy it is to take advantage of some of these opportunities using already established systems or software. For example, money transfer operators can make the switch to online remittance – while enjoying all of its benefits – using advanced remittance software such as the Money Transfer Application. This software is designed to give money transfer and bureau de change businesses total control over their business; from operations to day-to-day financial tracking and accounting. While the software is primarily programmed to facilitate both international and local remittance, it equally enables businesses to provide bills payment services across over 100 countries to customers.
The same goes for businesses looking to harness opportunities in the banking sector. Using Spotbanc, an online banking software, banks, electronic money institutions, bureau de change businesses, and other financial institutions can easily integrate seamless banking services into their business. This banking platform provides businesses powerful leverage to launch financial products faster and cost-effectively like never before.
COVID may have done the world of finance a bad turn, but the future belongs to businesses willing to change and adapt the technologies necessary for survival and growth.