COVID-19 leads to huge growth in digital money transfers to Pacific but concerns remains over high fees – Pacific Beat

Story by Nicolas Zoumboulis COVID-19 has led to a dramatic spike in money being sent digitally from countries like Australia and New Zealand to the Pacific, with those in the industry saying digital money transfers have grown by up to 400 per cent in places like Fiji and Samoa. But […]

Story by Nicolas Zoumboulis

COVID-19 has led to a dramatic spike in money being sent digitally from countries like Australia and New Zealand to the Pacific, with those in the industry saying digital money transfers have grown by up to 400 per cent in places like Fiji and Samoa.

But experts say high fees and expensive internet are still issues that need to be addressed.

Many Pacific governments are now joining a global campaign to pressure operators to reduce their costs, arguing remittances are a lifeline for many, especially during the global pandemic.

When countries around the world started shutting their borders, introducing lockdowns, leaving people without work, it was predicted remittances would fall sharply.

The World Bank estimated the amount of money being sent to the Pacific in 2020 would drop by 17 percent

But those forecasts have proved wrong in many Pacific countries, including Fiji, and it was largely thanks to technology.

“Contrary to what many experts in this industry have predicted we have seen it really bounced back over May to August and this was driven by an uptake in digitally enabled remittances,” Bram Peters, the Program Manager of the Pacific Financial Inclusion Program said.

He said both the number and value of money sent to Fiji via a mobile money wallet app quadrupled between February and August.

“The increase has been significant, more than 400 per cent compared to pre-COVID levels, so in the space of a couple of months they’ve really boosted the numbers.”

Jovesa, a Fijian student living in Melbourne was one of those to make the switch to digital, during COVID-19 lockdowns.

“I use a digital app to transfer money and send it over to my family in Fiji especially to my parents and my son…before I came to know about the digital app, I was sending it through physical transactions, which was more costly than digital app,” he said.

Fees and commissions have long made sending money back to the Pacific a costly exercise and experts say they’re among the highest in the world.

Previous estimates have put transfer costs as high as 10 per cent, and the region’s peak body, the Pacific Islands Forum Secretariat, as well as countries like Fiji and Vanuatu, recently joined global calls to reduce transfer costs during COVID-19.

Digital technology researcher Dr Amanda Watson said the pandemic’s put the issue back on Pacific government’s radars.

“There are global bodies including Pacific governments who are perhaps more aware of issue than they were before and are actively trying to get something happening to make it easier, better and cheaper, at least during the pandemic,” she said.

With the increasing demand, there is also a growing number of mobile transfer operators.

Harold Dimple, who heads up the company Rockit Remit, said mobile money is a niche part of the market that banks generally don’t specialise in.

“We send to people who fundamentally don’t have a bank account, they would traditionally do cash over counter remittances. People who use the banking system are usually a bit wealthier and transfer larger amounts for different reasons. But for family support, bank transfers are not necessarily biggest and most popular method,” he said.

Despite the rapid growth of the past few months, mobile money transfers still make up a fraction of all remittances.

Figures from Samoa’s Central Bank show that they while they grew from less than half a per cent, they only made up between 1.4 and 2 per cent of all transfers in April and May this year, while ‘non banks’ made up more than 90 per cent in May.

Many of the mobile transfer operators are still charging fees, although they’re generally at least half the fees charged for cash-based services.

Some operators have waived their fees during the height of COVID-19 lockdowns, which Bram Peters from Pacific Financial Inclusion Program said appears to have had a lasting impact.

“We’ve continued to monitor the transactions the promotional period and we’ve actually seen even after that free fee period those levels maintained the same, slowly growing even and it’s maintaining pace. New partners that were not connected to the platform have jumped on board,” he said.

His program has been working with the main phone provider in Fiji, and now has plans to expand to Tonga, where remittances make up 40 per cent of GDP.

They’re also campaigning to reduce the cost of remittances.

But Dr Amanda Watson from the Pacific Affairs Department at the Australian National University, says the, the problem of internet access has to be solved before any Pacific country makes a complete switch to digital transfers

“A key challenge is price, and the internet price in some parts of the Pacific is still expensive by world standards but it’s also about access, choice, speed and reliability of the internet. In some countries like Niue and other Pacific island nations there’s only one provider so people don’t have a lot of choice,” she said.

“For instance, in Papua New Guinea, there are provinces like Gulf Province that have no bank branches, and it would be very difficult for people in some places without electricity…but obviously, for those who can take advantage of the opportunity to use smartphone apps, then obviously that’s clearly more efficient and better for them.”

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