Pandemic led dramatic shift from cash to digital remittances: Brac Bank study

The usage of digital remittances has increased sharply over the last two years, thanks to a dramatic pandemic-induced shift from cash to digital, according to a study. 

The proportion of Brac Bank remittance transactions received digitally in either bank accounts or mobile wallets, increased from 37% in 2019 to 75% in 2020, according to the study titled "Shifting from cash to digital remittances during the pandemic: A case study of Brac Bank in Bangladesh."

The United Nations Capital Development Fund (UNCDF) has brought up insightful trends of Bangladesh's remittances in this case study.

The findings of the study also reflected on the overall trend of receiving remittances through digital channels.

The total remittances channelled through mobile financial service (MFS) providers surged by 13 times in the last two and half years.

Before the pandemic in December 2019, remittances through MFS providers amounted to only Tk30 crore, which increased to Tk384 crore in April this year, according to data from the Bangladesh Bank.

The pandemic led to increased use of digital remittances, said the UNCDF study.

"When the pandemic broke out in early 2020, there were concerns that remittances in Bangladesh would decline, which would negatively impact the economy, specifically the well-being of migrant recipient families. While remittances to low- and middle-income countries around the world did fall by 1.6% in 2020, the opposite effect occurred in Bangladesh, where inbound remittances increased by 18%."

The case study on Brac Bank shows that digital transfers of small value remittances increased sharply as digital channels are cheaper, faster and safer than cash remittances.

Brac Bank transaction data showed as many as 86% of transactions received through bKash mobile wallets are under $200, compared to 30% of those received in bank accounts and 19% received in cash in the year 2021.

Study data shows that among the main countries sending remittances to Brac Bank customers, South Korea, Singapore, and the UK, where significant mobile wallet channels have been developed, send the lowest value transactions. Mobile wallet uptake has been lower along the Malaysia, Qatar and Saudi Arabia channels, which are still dominated by larger transaction sizes.

Although women comprise 60% of remittance recipients in Bangladesh, only 37% of Brac Bank's digital remittance recipients are women, according to the study.

"This is largely due to low levels of digital and financial literacy and limited adoption of digital and financial services among women in Bangladesh broadly," said the report.

For example, only 65% of women in Bangladesh own mobile phones compared to 84% of men, and only 43% of adult women have an account with a bank, financial institution or mobile money provider, compared to 63% of men, according to the report.

Before the pandemic, formal remittance inflows totalled $22 billion, and estimates suggest that informal inflows were as high as $14.5 billion, the report said.

As of 2018, 10 million people in the country, or 9% of the adult population, received remittances. Of these, 60% were women and 78% lived in rural areas.

Brac Bank Limited is a commercial bank in Bangladesh that since its inception in 2001, has partnered with 57 exchange houses and 7 banks to build a worldwide remittance network. bKash, one of Brac Bank's subsidiaries, is the country's largest mobile wallet provider with 40 million customers, including 4,00,000 digital remittance recipients.

Brac Bank partnered with the UNCDF to improve Bangladeshi remittance recipients' access to digital channels and to strengthen the use of remittance-linked, value-added services.