Remittances on an uptrend
While the World Bank had estimated a 20% decline in global remittances at the start of the COVID-19 pandemic, this was not the trend in the Philippines. According to the Bangko Sentral ng Pilipinas (BSP), personal remittances amounting to P2.9 billion from overseas Filipino workers (OFWs) went up 9.1% in September 2020 compared to the same month in 2019.
During a Zoom interview with Alberto Guerra, the CEO of US-based UniTeller Group said: “The remittance industry will continue to be resilient if we apply the lessons from the past 12 months,” pointing out that digital remittances should be emphasized as the way forward in order to achieve greater financial inclusion and access, particularly for unbanked communities.
Founded in 1994 and originally offering remittance services in Latin American countries, UniTeller is now an international money transfer firm with a network of more than 140,000 paying locations worldwide. It opened its Manila office in 2001 and was acquired in 2006 by Grupo Financiero Banorte, one of Mexico’s oldest and largest banking institutions.
COVID-19 has immensely accelerated the use of digital channels for money transfers. When the global pandemic first unfolded, many migrant workers struggled in sending money back home amid the lockdowns and physical distancing protocols amidst economic uncertainty. Mobility restrictions have made cash remittances difficult when people are unfamiliar with digital alternatives in areas that are unbanked or underbanked.
In December 2019, UniTeller released a report titled “Both Sides of the Coin – The Receiver’s Story.” The survey revealed that the Philippines has a high smartphone penetration rate, with 97% of respondents owning a smartphone and 92% saying that they would consider using a mobile app to receive money transfers electronically.
Guerra disclosed that such mindsets have since become stronger due to the pandemic, making the transition from the traditional brick-and-mortar mode of transfers to digital wallets relatively seamless. “With more than two-thirds in Asia owning a mobile phone and 90% being smartphone users, this highlights that there is still a lot of work to be done in increasing the awareness and accessibility of digital solutions and we believe this would be a trend which will dominate in the year ahead,” he explained. The company wants to ensure that there is adequate digital infrastructure and payment networks in both origination and destination countries, aside from increasing users’ competence with technology and financial services.
UniTeller’s online remittance service called uLink experienced tremendous growth this year, showcasing the increase in appetite towards digital remittances. It is readily available to consumers via www.ulinkremit.com as well as to strategic partners who can offer the same service to their clients through uLink’s white-label solution. Guerra sees an improved financial inclusion for unbanked communities in view of the Philippine government's efforts to promote digitalization of payments and implementation of the Philsys national identification system.
The Philippines continues to be among the most resilient corridors in the industry with more than 10 million OFWs propping up the economy in the middle of a recession. Although total remittances contracted by 1.4% in the first three quarters of 2020, the recent surge in inward dollar transfers helped the country avoid the BSP’s worst-case scenario.
Cash remittances from North America and Asia Pacific grew by 5.6% and 4.4%, respectively, while those from the Middle East declined by 13.2%. OFWs in Saudi Arabia were the most adversely affected with a contraction of 19.1%. Filipino expatriates in the US provided the highest share in terms of total remittances at 40.1%, followed by those in Singapore, Saudi Arabia, Japan, United Kingdom, United Arab Emirates, Canada, Hong Kong, Qatar, and Taiwan.
Guerra’s outlook is positive for 2021 while the global economy rebuilds and COVID-19 vaccines become available. He expects digital transactions to gain momentum as national government agencies and fintech players continue improving the infrastructure and channels for cashless transactions.
Some high-tech players are capitalizing heavily on this trend by disrupting the industry with low fees and virtually instant mobile transactions, thereby eliminating many friction points experienced by migrant workers in the past. For its part, UniTeller wants to promote financial literacy on remittance technologies and ensure that consumers can fully leverage money transfer services while making it easy for both senders and beneficiaries in carrying out their transactions.