Postal Remittances Are Not Immune to a Pandemic
As trusted, universal public service providers with a vast global network, Posts are natural partners in the delivery of affordable and easily accessible global remittance services. Current estimates show that Posts are the most cost-effective remittance service option, with service fees averaging 5.7 percent compared to 10.3 percent at banks. In addition, the scale of the global postal network, with more than 668,000 physical contact points, ensures that Posts are able to offer remittance services to consumers almost anywhere, anytime. The Universal Postal Union (UPU) has helped to build a worldwide electronic postal payment network, International Financial System (IFS), which enables Posts to exchange money electronically amongst themselves, using a secure and encrypted platform.
Falling remittance volumes
Like other cross-border financial services, postal remittances are now facing a downturn due to the COVID-19 (coronavirus) outbreak and the subsequent social distancing measures put in place starting in March. The drivers for this reduction in remittances are likely a combination of reduced economic opportunities, especially in the informal economy, reduced disposable income, and people self-isolating thereby reducing the opportunities to send money.
In the first quarter of 2020, we have already seen a moderate reduction in remittance amount for the top 20 corridors using the IFS platform, compared to the same time period in 2019. These top 20 IFS remittance corridors usually transfer an average of $22 million per month amongst themselves. The graph below shows how remittance volumes have changed so far in 2020.
Unsurprisingly the largest reduction in volume are for corridors originating from continental Europe. Within this overall reduction in volume in March 2020, however, there are some increases originating from Latin America.
The UPU expects volumes to fall further during April, and possibly extend to May or later, depending on the prevailing economic and public health measures in place and the pace of economic recovery in different countries. By current estimates the current pandemic-driven crisis could surpass the financial crisis of 2008, when global remittances took over a year to recover.
Posts are responding to serve their communities
As essential service providers during this time of public health crisis, and as community-centric institutions, Posts around the world are undertaking measures to increase their financial services outreach to clients. These measures include limiting and staggering branch hours, increasing withdrawal limits through ATMs, using post employees to deliver cash, and delivering essential supplies including medicines.
For example, Pakistan Post is delivering pensions to the elderly’s doorstep to ensure that they do not venture out of their homes. Tunisian Post is staggering the dates for pension payment disbursement by age, so that distinct cohorts of population remain isolated from each other. Italian Post is enabling all citizens who normally receive social security benefits at post offices in cash to request free home delivery. In a similar theme, UK’s Royal Mail has created a mechanism that allows anyone who cannot leave their homes to ask their friends or family to withdraw cash on their behalf.
To foster economic growth and prepare for an end to the pandemic lockdown, Swiss Post, through its Post Finance arm, is offering small and medium enterprises (SMEs) in Switzerland a zero percent bridge financing overdraft facility of up to CHF 500,000. This is in support of the Swiss Federal Council’s assistance program to offer liquidity for SMEs with credit guarantees from the Federal Government.
Going beyond financial services, the world’s largest postal services provider, India Post is delivering lifesaving medicines and equipment across the country, in addition to the doorstop postal banking services they already provide. Similarly, Bangladesh Post is delivering personal protective equipment (PPE), COVID-19 testing kits, and awareness leaflets to all 64 districts free of charge.
In the face of an unprecedented global public health crisis, Posts continue to innovate their financial services outreach and remain a valued service provider to communities and individuals. At UPU, we will continue to monitor the global postal financial services status and offer assistance to our Member Countries at a time of crisis.
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