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Remitters hope digital volume spike will last

How Covid-19 is tipping the scales towards fintech money operators at the expense of incumbents and banks.



Digital remittance businesses are having a good crisis, reporting record volumes as migrant workers go on a splurge of transactions in the face of currency volatility and surging G10 currencies.

Does this surge created by the Covid-19 pandemic represent a decisive shift to digital means of sending money overseas? Or will the volumes that digital providers are experiencing disappear if many of these workers lose their jobs? Is this moment the sign of a lasting victory against high-fee incumbents, or a random blip in fintech fortunes?

The mood among fintech companies providing money transfer is bullish, the terrors of the coronavirus aside. They believe Covid-19 represents a comprehensive catalyst to their business models that will not reverse.

“This represents a step growth,” said Yogesh Sangle, Singapore-based global head of consumer business at NIUM, including its InstaReM remittance product for individuals and small businesses. He says the surge in volumes NIUM processed in March will stabilize in April but at a permanently higher level than what the firm was handling in February.

Hong Kong’s TNG Wallet, which got its start among the city’s domestic workers and now manages corridors across Asia, also announced record performance, with March pushing its first-quarter volumes to over 3.5 million transactions valued at HK$3.2 billion ($410 million).

Growing fintech fortunes

“Covid-19 is hastening the move online for remittances,” said Paul Byrne, Dublin-based CEO of Currencyfair, which services a wealthier segment of expats and retirees, as well as SMEs, with bank-to-bank money transfers. “Because people can’t go out, there is a huge move to digitize remittances.”

Fintechs already represent a large portion of the global remittance market, which in 2019 the World Bank pegged at $550 billion – of which $48 billion stays in the hands of middlemen and financial institutions, whose average revenue margin is 6.9%.

The biggest fintech in this space is TransferWise, which processed $40 billion of transactions in 2019, or about 7% of the market, making it a bigger player than incumbents such as UAE Exchange, Ria and MoneyGram – although still far away from reaching the industry’s top incumbent, Western Union, whose $80 billion in transactions last year gave it 14% of the market.

Covid-19 is hastening the move online for remittances

Paul Byrne, Currencyfair

Below this layer of global fintechs is a number of regional ones. NIUM is one of the biggest Asia-based players, having processed $4 billion of transactions in 2019. The biggest single player is incumbent Western Union, with a 14% market share, representing $80 billion of transactions.

Ant Financial and WeChat have also offered remittance services since 2018, and although they are not yet claiming massive market share, they are catering to Chinese expats, who make up the second largest group of people sending money back home, after Indians.

Banks are also in the remittance game. The likes of JP Morgan, Bank of America, Citibank and Wells Fargo together have only about 5% of the global market, but they serve much larger ticket sizes and charge higher fees, as they use SWIFT’s relatively expensive rails.

The average J.P. Morgan remittance is $15,000, well above the ticket sizes of fintechs serving prosperous expats such as Currencyfair ($5,500) and TransferWise ($2,300), and a world away from the $300 average transaction at Western Union, according to venture capital firm Proof of Capital.

Crumbling incumbents

Until now, the incumbents such as Western Union, although seeing market share slide, have continued to experience growth, as the number of migrants continues to grow. These rely primarily on physical points of money collection and dispersal, although they are also growing their own digital channels.

However Covid-19 is showing cracks in the incumbents’ agility. The spike in volumes overwhelmed UAE Exchange, the second largest player and a subsidiary of London-listed Finablr. In mid-March the company froze its services in the UAE, citing operational challenges.

The volumes in March represent customer acquisition

Yogesh Sangle, NIUM

The Gulf region is one of the biggest sources of remittances, after the United States, accounting for 23% of global money transfers. In this vital region, its biggest incumbent has fallen. Digital players are rushing to fill the void.

This is why fintechs believe their volume spikes are going to have residual stickiness: they may have tried out a digital wallet for a lower fee or because they couldn’t reach the money shop, but they’ll stay for the experience.

“Once a consumer tries us, they complete a transaction in just two or three clicks,” said NIUM’s Sangle. “So they tend to stick, which is why the volumes in March represent customer acquisition.”

Learning new habits

There is more evidence that a real change in behavior is underway. is an Irish company that got its start selling international air time to migrant workers, so they could use their salaries to top up their family’s mobile phones back home. The company then shifted to selling data, so workers and their families could use WhatsApp and other services when they lack access to wi-fi.

Now it is selling this to tech platforms like Careem, the Middle East’s version of Grab or Uber. As rides evaporate amid the Covid-19 lockdown, Careem is pushing data top-ups a way to keep users coming to its wallet. Mark Roden,’s founder, says the company now even sees users in European markets using the service to send value within the same country, not just to families in India or Southeast Asia.

Remittances are a blood commitment to support the family

Mark Roden, operates at the smallest end of the remittance business, with ticket sizes of around $10. This means the company expects to remain in use even if more migrants lose their jobs. Overall, though, Roden believes digital providers are not going to see too many users fall away even if some of them lose their jobs.

“Remittances are not an optional decision,” he said. “It’s a blood commitment to support the family back home.”

Surviving the prolonged lockdown

If workers in service industries are losing their jobs, they are more likely to turn to digital remittance companies, whose fees are a lot lower than incumbents relying on networks of cash-based agents.

Similarly virtual banks or the digital arms of financial institutions should be able to enjoy a growth among SMEs at the expense of incumbent banks using SWIFT rails.

Nor is it just about cost: many people fear spreading the coronavirus by handling physical cash and coins. This is already accelerating the general use of non-cash payments in affluent countries, which can create complications for merchants, as it delays settlement – but this will probably prompt more businesses to become adept at handling electronic money.

Another reason why Covid-19 is doing harm to the traditional business models is their customer base. The type of worker most likely to lose their job are the casual laborers, many operating off the books, who exist in a purely cash-based world. These are the kinds of people who have to use Western Union.

Is it going to be a 10% decline or an 80% decline?

Paul Byrne, Currencyfair

There will be mass layoffs in services, but the higher-end remittance fintechs also cater to workers in areas such as construction, where employment is more stable, and SMEs.

The biggest risk to digital players is that the Covid-19 downturn is so long that it kills their business outright. Barring operational fails such as UAE Exchange, the leading incumbents still have powerful brands – and big balance sheets. They can survive a decline in business. Fintech upstarts may be winning market share, but that could still happen in the face of declining absolute numbers, as more and more businesses shut and global trade and supply chains rust.

“There’s a risk to every customer base,” said Currencyfair’s Byrne. “But is it going to be a 10% decline or an 80% decline?”

But fintechs live off margins so low, compared to physical money operators and banks, that they think they are the ones who can ride out a severe decline. And this will become apparent very soon.

“In the next three months we will see a big shift to digital players,” said Sangle.

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