Impact of the COVID-19 pandemic on money transfer industry

Money transfer industry is greatly affected by the pandemic

money transfer industry

Impact of the COVID-19 pandemic on money transfer industry. Source: shutterstock.com

The coronavirus pandemic affected everyone in some way. It changed consumer behaviors and caused many great businesses to file for bankruptcy. With every passing day, the global economic situation is getting a little bit worse. Therefore, it’s no surprise that the pandemic had a profound effect on the money transfer industry. Admittedly, it wasn’t entirely bad. However, many of the smaller money transfer companies might be forced to file for bankruptcy as well. The size and resilience of the business truly make a difference in this industry. And there is no avoiding a massive fallout from the coronavirus crisis.

How the money transfer industry was affected by the COVID-19 pandemic?

Money transfer businesses are greatly affected by COVID-19 pandemic. With the world going into lockdown fast, transfers dropped suddenly and at an unprecedented rate. Therefore, every money transfer company out there suffered a setback. However, the severity of this setback and its overall impact on the company varied greatly.

Considering the fact that these businesses, basically, make money off the volume of transfers they process, the lockdowns caused big losses. The impact of a drop in remittances alone is devastating. It can even have fatal consequences for the millions of dependents who rely on money from migrant workers just to survive. Transfers home from these workers have suffered the sharpest decline in recent history. And the situation might yet get worse as the second wave of the virus threatens the return of lockdowns.

However, money transfer companies do most of their business not with remittances but with e-commerce and small business transfers. They are also popular with private international investors, especially in the real estate sector.

All of those industries, except for e-commerce, have also experienced a sudden and significant drop. Therefore, with less money going through those routes, money transfer companies are affected by the lack of business. At least some of them are. However, top providers in this industry seem to be holding up exceptionally well.

That’s understandable to some extent. The pandemic has also triggered an unprecedented rise in the use of fintech. Therefore, even if the companies are processing less money now, they are getting more customers overall. This might be enough to offset some of the shortages in other areas.

Impact of the coronavirus pandemic on top money transfer companies

money transfer industry

Impact of the coronavirus pandemic on the money transfer industry. Source: shutterstock.com

It’s true that some of the smaller money transfer providers are in distress. The majority of those have little running capital and mostly rely on corporate clients. These companies also deal in FX hedging, which is currently very risky due to the FX market volatility.

Companies like this are reporting losses and some of them have already failed and shut down entirely. But businesses that were doing well before the pandemic remain strong through it as well. According to a reputed money transfer service reviewer MTC, top providers in the industry today are Moneycorp, Currencies Direct, WorldFirst, OFX, and TransferWise. None of these companies are showing any major signs of distress over the global economic situation.

In fact, Moneycorp seems to be well on the way with its expansion plans. At the beginning of July, the company announced that it entered Canada. Therefore, it is now able to serve both corporate and private customers seeking international transfers to and from Canada. The company has been successfully working in the US for years and this expansion is a big step in its overall growth. And all of it happened even with the threat of the second wave of the pandemic.

Entering a new market definitely helps Moneycorp to improve its position despite reduced transfers from some of its regular customers. Moreover, as the interest in fintech services is growing rapidly now, the company has a chance to gain a lot of positive attention.

OFX and Currencies Direct are both subdues in their announcements. However, both companies function as usual despite the pandemic. They are renowned for delivering top-notch customer service. This fact hasn’t changed even with the restrictions of lockdowns and social distancing.

How e-commerce helps money transfer companies

For all that many industries are suffering because of the drop in business, e-commerce if going through rapid growth. Online sakes have nearly doubled since the beginning of the pandemic. Therefore, companies that are directly involved with e-commerce payments are doing rather well.

Note that this doesn’t mean that people have started to buy more goods. The overall consumption level has dropped, which is the reason why the global economy is in recession. But customers switched to shopping online. Therefore, businesses that sell there are doing well, while so many small shop owners are going bankrupt.

WorldFirst and TransferWise are money transfer companies that are benefitting from this situation greatly. In fact, TransferWise CEO says their company is doing great largely due to the increased volume of online sales.

TransferWise recently announced its long-awaited partnership with Alipay. Now all TransferWise customers can send transfers to Alipay users with ease. This has given a big boost to the business.

WorldFirst is owned by the Alibaba Group and is one of the most popular payment processing solutions for online sellers. Therefore, the growth of this industry is also positively affecting the company.

These gains allow compensating for a reduction in tap-and-go transactions as well as some types of large transfers.

Also, TransferWise keeps expanding having opened branches in the UAE and Japan this year alone. WorldFirst is also growing rapidly. Neither of the companies is showing any signs that the pandemic is slowing them down.

Is everything back to norm now?

money transfer industry

The global economy is restarting as the lockdowns are lifted. Source: pixabay.com

The global economy is restarting as the lockdowns are lifted. Even with the second wave of the pandemic in some countries, the overall situation seems to be improving. Global trade is getting back on its feet and factories are running again. Therefore, money transfer businesses are getting some of their lost clients back.

However, none of this means that things are back to “normal”. The damage suffered because of lengthy lockdowns of entire economies is impossible to overlook. Even if the world gets back to the same level of production and consumption capacity it was at before the pandemic, it will take months to make up for the damage.

Unfortunately, the damage is still growing due to lost jobs, failed businesses, and other consequences of the pandemic. Therefore, the recovery period will be complicated and long. The crisis of 2020 has already been compared to the Great Depression, and that one lasted for a decade. The world has only recovered after the economic crisis of 2008 by 2017.

All this considered, the picture for the world’s economic future isn’t very promising. Also, it’s important to note that this crisis is unprecedented. Therefore, it’s impossible to make any accurate recovery forecasts.

So, money transfer businesses that were big and resilient enough to pull through the peak of the crisis are doing well. But no one can be sure this will last.

What is the future of the money transfer industry?

The entire financial industry of the world is under threat now. Banks are predicted to suffer tremendous losses this year because of the pandemic. Money transfer companies also experience some losses because of the reduced global transfer volumes. However, they also gain new customers as people are choosing to use online services over traditional banks.

This change in consumer behavior isn’t likely to revert once the situation stabilizes. Therefore, in the long run, these companies will experience a big rise in business. In fact, the situation is already improving for them.

But at the same time, the future is very uncertain.

The 2020 coronavirus recession is unprecedented in many ways. Therefore, it’s impossible to make any certain predictions at the moment. The changes occurred extremely fast as countries had to stop their production facilities and trade basically overnight. This hasn’t happened before, so the exact implications of the move are still unknown.

As factories are going back to work and global trade is restarting, the global economic situation is starting to improve fast. However, the damage dealt by this massive global period of the economic shutdown is already done. Even if we are not yet able to understand the whole scope of it.

There is no denying the fact that developing economies have been hit the hardest. And as the recession continues, they will keep suffering tremendous losses. Already the outpouring of capital from these countries is the biggest in recorded history. As the money transfer industry is largely influenced by investments and other types of money transfers to and from developing countries, its future is uncertain as well.

But seeing the positive changes happening already makes for a hopeful prognosis for the industry.

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