The World Bank has predicted that the global remittance industry will retract by 20% amid the global economic slow-down resulting from the coronavirus pandemic.
With a plethora of crypto firms targeting the remittance sector, the news may comprise a poor omen for many blockchain firms seeking to gain a foothold in the cross-border payments industry.
World Bank predicts record slump in remittances
On April 22, the World Bank published a report predicting that 2020 will see the “sharpest decline of remittances in recent history.”
Slashed wages and falling employment of migrant workers is expected to drive a 19.7% drop in remittances destined for low and middle-income countries, or LMICs. In total, this represents a $445 billion loss to millions of households in emerging economies.
“Remittances are a vital source of income for developing countries,” stated World Bank Group president David Malpass, adding: “Remittances help families afford food, healthcare, and basic needs.”
“The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.”
The report notes that remittance flows to LMICs became larger than foreign direct investment, or FDI, with the World Bank asserting that remittances have become “an important milestone for monitoring resource flows to developing countries.”
Remittances to LMICs reached a record of $554 billion in 2019.
Prediction offers poor outlook for crypto remittance firms
With the average global cost of sending $200 sitting at 6.8% globally and up to 9% in Africa, the crypto industry has long sought to establish a significant footprint in the industry.
The World Bank’s prediction offers a poor outlook for many blockchain firms specializing in cross-border payments, with even crypto’s largest firm’s struggling to make a meaningful impact on the remittance sector.
While Ripple has inked numerous partnerships with remittance firms in various regions, the scale of blockchain’s use within the sector remains to be seen — with a recent Intermex earnings call revealing that RippleNet will not be used to service the firm’s major markets, and will be trialed in new markets instead.