COMMENTARY: Money Transfers: A Lifeline for Families Impacted by the Pandemic

At the height of the pandemic last spring, the World Bank projected that 2020 remittances to low- and middle-income countries would decline by 20% year-over-year—nearly $445 billion—because of lower wages and growing unemployment among migrant workers. And in the process, there would be yet another casualty of Covid-19 as the financial lifeline for many vulnerable households around the globe was cut off.

However, as the pandemic persisted, the opposite actually occurred. Counter to the World Bank’s predictions, consumers sent more money to family and friends across borders to help them during challenging times.

The LSE Business Review noted that many countries saw double-digit increases in remittances. These included Guatemala, which hit historic highs in July and August, as well as Pakistan and the Dominican Republic, which experienced 37% and 26% growth in remittances, respectively. The same held true for service providers that facilitated remittances. For example, Paysend’s user base more than doubled during the pandemic.

So why did this trend buck conventional wisdom? In many cases, individuals wanted to continue providing every bit of monetary assistance they could to loved ones who may have been facing greater financial need or who were unable to work because of the pandemic. As the Covid-19 wave surged across the globe, so too did sacrifice and generosity.

Not only did Covid-19 make it difficult for immigrants, expats and foreign exchange students to travel back to their homelands, it also impacted their ability to send and receive money through traditional methods. Banks and other financial institutions ceased in-person services as part of the global shutdown to prevent the spread of the virus.

So, consumers began to look for other methods to send money.  These efforts boosted the popularity of mobile banking solutions and apps that supported digital money transfers and contactless payments. These tools made it simple for the average consumer to securely transfer money, at any time, from anywhere, breaking them free from slow, frustrating in-person processes. These solutions also empowered consumers to take greater control over their own finances and provided a powerful sense of independence because it made it easier to help others back home.

This was the case for 20-year-old Samuel and 71-year-old Anthony, who both supported their families in Ghana during the pandemic.

U.S. resident Samuel began relying on a digital solution to send money each week, as he and his mother wanted to help family members who had been unable to work during the pandemic.  “My mom takes care of her whole family back in Ghana,” he said. “She gives me the money and I send it back home to the family as there have been fewer jobs available because of Covid-19.”

Similarly, when in-person transfers became impossible, Anthony turned to an app to send money from the U.S. to Ghana once a month. The money he sends is critical in helping his family buy food and pay for their education and needed medical care.

Anthony and Samuel are not alone. There are hundreds of thousands of individuals who have ushered in a new era of innovative fintech, making solutions such as mobile banking, contactless payments, online digital wallets, and digital money transfers part of the mainstream.

Before Covid-19, digital financial transactions hadn’t caught on in the United States. In fact, the U.S. lagged significantly behind other countries, like China and India, with a less than 10% adoption rate. But as they were forced to find other means to make purchases during the pandemic, and after the Centers for Disease Control (CDC) recommended use of touchless payment methods, U.S. consumers began using less cash and relying on digital solutions,

Once vaccines are more widely distributed and our country fully opens up, some consumers no doubt will return to their old habits because they believe cash is king. However, more than half of those who were new to digital financial tools and those who increased their use of them in the past year will continue relying on them post-pandemic, according to a recent McKinsey study.

Now that consumers have seen the ease with which they can conduct financial transactions through these new digital solutions, it will be no surprise to see them continue to embrace these solutions to lift up and support their families around the world.

—Matt Montes is U.S. president at Paysend.