With the world economy facing frustrating delays in recovery, the remittance industry has gained in significance in ensuring a summer of no-contact technologies.
Cross-border remittances, which account for more than 5 per cent of GDP in at least 60 low- and middle-income countries, have for long trumped other aspects of the payments ecosystem. They have now gotten dearer, as migrants working in foreign countries provide the much-required financial backup to their loved ones reeling under financial stress.
The World Bank’s prediction of a 7 per cent drop in remittances in 2021 has led to a scramble among payment companies to roll out technology-led services to expand the consumer base while simultaneously driving the agenda of achieving financial inclusion.
A central role
The UAE accounts for one of the largest captive migrant population vis-a-vis the ratio to its overall population. Nearly 90 per cent are expats, and combined they contribute a significant chunk to the migrant economy between the country and several parts of South Asia, Asia-Pacific and Africa.
Of this, about 75 per cent prefer to spend money directly using the wire transfer services offered by exchange houses or banks, although the pandemic has seen a significant shift in number of customers opting for digital solutions of such entities.
Keep funds flowing
The UAE government’s initiatives to create an ecosystem of growth for fintech companies has been a catalyst in effecting this change. Organizations have begun to realize that financial inclusion is as much a social calling as it is about opening dormant opportunities in financial services sector.
Every expansion on the physical front warrants a simultaneous investment in robust cloud-based solutions and getting into collaborative partnerships to enable affordable payments. Not to mention the need to strengthen vital corridors to make the customer journey of making a cross-border transaction worthwhile.
Challenges abound
This approach of balancing digital ambitions with the reality of easing the transition of UAE’s alternatively-banked population is a necessity. It finds support in a survey compiled by the UAE’s Foreign Exchange and Remittance Group late last year, which said that changing demographics (27 per cent), labour mobility (23 per cent), unemployment (16 per cent) and the pandemic (16 per cent) would all affect the UAE’s remittance industry in 2021.
With such uncertainty surrounding the sector, it only makes sense for all players involved to cast their net wider. The pandemic induced restrictions on travel and tourism, and its resulting impact on SMEs and other businesses have undoubtedly impacted the foreign currency exchange business. Nonetheless, business owners remain hopeful that the UAE’s structured vaccination programme will be a precursor of better days ahead.
Build up resilience
The UAE economy has time and again displayed a unique resilience to withstand global shocks. We have been seeing this right from the early days of the pandemic in 2020, and now is no different. The vaccination drive is going on successfully and safety measures are in place for businesses and people to resume normal activity.
International payments providers as well as local exchange houses have been heavily investing all through the first quarter 2021 to build robust technologies to supplement their marketing efforts and brand building exercises. And with Ramadan, outbound remittances are expected to peak, heralding a possible new wave of innovation and growth for the payments industry, well beyond the second quarter.
