According to data released by the World Bank, international remittances exceeded 773 billion USD in 2021, 7.6% more than the year before. When are money transfers most commonly made? Who orders them, and in what situations?
Migrants drive money transfers service
The vast majority of remittances are sent from developed countries to emerging ones. This relationship shows that the primary source of money sent is labour migrants, and the beneficiaries are families and relatives remaining in the country of origin.
In 2021, as much as 605 of the total 773 billion USD was sent to low- or middle-income countries. This is mainly dominated by countries in East Asia and the Pacific, Latin America and the Caribbean, as well as South Asia. Europe and Central Asia are also very important destinations for money transfers.
The largest source of money transfers is the United States. Many transfers are also ordered from developed European countries such as the United Kingdom, Germany, France and Italy.
When are remittances most often sent?
Statistics clearly demonstrate that most money transfers are made regularly, such as once a month. One reason for this is the close link between this service and the phenomenon of emigration. People who change their country of residence for economic reasons are most likely to stay in close contact with their families and regularly send them funds for living or extra expenses.
Therefore, money transfers are the most resilient to adverse developments related to, for example, a financial crisis or critical world events. When other sources of money flow to a country decline, remittances most often remain at a similar level.
It was confirmed in 2020, the year of the economic recession triggered by the coronavirus pandemic. Remittances proved resilient and were the most important source of international financing for emerging countries, while foreign direct investment fell by 10% - according to World Bank data.
How is money from remittances being spent? According to 'The Remittance Effect' report by Oxford Economics, 48% of the funds received are spent on basic living expenses and medicines in emerging economies. Some funds are also delegated for education and to pay off bills and other obligations.
Money transfer for a special occasion
Slightly different behaviour can be observed when remittances flow to developed countries. In this case, using the money received for basic needs is declared by fewer than 30% of respondents.
More popular are occasional remittances for services, luxury goods, or specific purposes. They account for 53% of all money transfers to these countries.
As many as 24% of respondents from developed countries admit that remittances are a gift to them, e.g. for a birthday or special celebration. Increased activity of such transfers is also recorded around the festive season.
In this way, people abroad have the opportunity to maintain their ties with their families remaining in the country. Sending a gift from, for example, the USA to Poland is often associated with many formalities and high costs. Ordering a transfer is much simpler and, thanks to the many companies providing such services, also far more cost-effective. For example, as part of a promotion valid until 10.10.2022, ordering a money transfer from the USA to Europe on Conotoxia.com and selecting Online Banking as the payment method will be sent for free, without any fees.
Sometimes transfers are also sent to purchase a specific item, such as a computer, phone or TV, but it does not count as a gift. Money transfers intended for tourism and travel are also popular. It is common, for example, to send funds to a family to buy tickets so they can visit the sender in their current country of residence.
In what other situations are remittances sent? About 20% of respondents from both developed and emerging countries indicate that the money received is used for investments such as real estate or is simply a form of savings.