What is the future for money in a post-pandemic world?
What will be the future for money after COVID ends? Will the transaction costs be sky-high? Such questions remain at the forefront for those involved in the remittance industry, both individuals and businesses, along with the states highly reliant on remittances for economic stability.
How has the pandemic impacted the capital and money around the world?
When looking at the future of money in a post-pandemic world, let us take a look at the impact of the virus outbreak on the capital of the world's most powerful nation. Moneyfit's blog tells us that the cancellation of sporting, religious, and political events have reduced the revenue generated from these gatherings in the United States, which by the way, is the most advanced economy in the world.
As per Reliefweb's report, remittances make one of the most critical portions of multiple countries' economies, especially for Sub-saharan Africa and South Asia. It is a substantial part of the process of making up foreign loans for most of the developing countries. Households that depend on remittances have suffered massively in the sense that they are now unable to pay for their basic necessities. Moreover, the pandemic has also caused job losses to millions of migrants because most of these immigrants work in organizations with next to no employee protection policies.
Weforum tells us that the pandemic's negative effect on the remittance industry can get even worse for almost 1 billion remittance-dependent people, which amounts to 15% of the total global population. Bad news - none other than the World Bank estimated that global remittances are likely to decline heavily by 20 percent, which is pretty significant.
What remittance costs actually are, and how to counter Covid-induced financial crisis
The high cost of transferring money has discouraged people from remittances and encouraged them to operate locally instead. In a Prnewsire's news release, socially responsible organizations like PassTo are taking a stand and are willing to eliminate additional costs that are poison for the remittance industry. Transaction costs are critical determinants of net profits or losses. These costs can diminish net returns altogether and indirectly negatively affect the capital that the investor invests afterward. When transaction costs are lowered, the economy becomes more efficient, and the labor is freed to produce wealth.
Moreover, transaction costs also impact local households as people are discouraged because of these costs, which might play a vital role in increasing the poverty rate. Thankfully though, firms such as Due are looking to oppose this effect, which can stabilize the remittance providers and encourage them to revert to their pre-pandemic practices once we get rid of this virus. Governments must take adequate measures to create more jobs to cope with the unemployment rate caused due to the virus and organize programs that encourage the population to diversify their digital age skills.
Statistica shows that digital payments will increase by 14.2% in the following year. This might be due to a large number of cashless payments in the lockdown. According to Unicef, getting cash into the under-privileged hands is the best way of getting out of this financial disaster that COVID has put us under. Cash transfer has helped countries like Sri Lanka, Thailand, and Sierra Leone to counter their economic crisis.
The current circumstances have forced businesses to adapt, which includes improving their presence in the online space. The retail and even wholesale companies have specially evolved themselves to adapt, which has excelled them to new heights. Right from payments to operation, delivery, and even after-sales services, digital advancements, especially cashless payments, have certainly helped in financial inclusion. Availability and access to financial services are keys that the globe desperately needs to overcome this economic crisis.
What does all of this mean?
With a change in international transaction costs and a stable inflow of remittances, we can expect positive numbers in the near future. This will also mean that developing nations will not rollback. Digital payments are bound to increase as time progresses due to the virus, as per Deloitte. And if there is something good that may come out of 2020, it will be that the development can go down a new road of digitization, and the Covid outbreak would be remembered as a catalyst for that.