Send Money Pacific Blog

Remittance costs to the Pacific during COVID-19


This has been a difficult year for many, particularly migrant workers who are away from their families. The International Migrants Day celebrates the hard work, sacrifice and resilience of these everyday heroes. The continued contributions of migrants through their remittances despite COVID-19 and the predicted decrease in remittances by the World Bank exemplify the fundamental role of migrants to not only their families but the wider economy.

The largest areas of concern raised in regard to supporting Pacific communities are the associated fees with their money transfers, as well as the number of available services. Majority of the literature suggest that fees have remained high for limited services, which is not necessarily applicable for regions such as the Pacific per research findings conducted by Send Money Pacific (SMP).

Based on data collected prior to the COVID-19 lockdowns in March until November, average overall costs of sending money from Australia and New Zealand to the Pacific with money transfer operators (MTOs) have declined. In Australia, the average overall total transfer cost declined from 11.03 per cent in March to 9.48 per cent at the end of November. Similarly, New Zealand followed a similar trend as its average overall total cost decreased from 11.53 per cent to 10.61 per cent.

Though these overall figures indicate the reduction in fees and total costs, it must be acknowledged that these include banks which underestimate the actual change in costs due to Money Transfer Organisations (MTO). Given the knowledge that migrants from the Pacific use MTOs more than banks, the data used in SMP’s analysis has focussed on the MTO average fees and services to present a more accurate representation of the remittance space in the Pacific.

The MTO average cost of sending money from Australia to the Pacific have per cent between March to November, whilst transferring from New Zealand only decreased from 7.91% to 7.55%. This modest decline is primarily driven by the minimal movement in the larger corridors of Fiji and Samoa.

Fiji’s MTO average fees remained steadily decreasing from 8.24 AUD prior to lockdowns to 6.02 AUD as of November, whilst hitting its lowest at 3.39 AUD in July. A dip in fees between May and July was largely driven by Vodafone’s partnership with the UN’s Pacific Financial Inclusion Programme to offer fee-free remittances through the M-PAiSA wallet. The M-PAiSA wallet allows Fijians to receive money from overseas for free through World Remit online, RIA, and Rocket Remit. Due to the high volume of customers that have used its services during this subsidised period, Rocket Remit has continued offering zero fees from October onwards. These changes still resulted in the reduction of MTO average total cost between Australia and Fiji from 8.39% to 6.61%.

There has been minimal change in the MTO average fees to send from Australia to Samoa, changing only by 0.50 AUD. Similar to Fiji, the fee-free service promotion by Rocket Remit underpinned the drop in average fees from the beginning of May and has been extended indefinitely as of December.

Kiribati experienced the most significant decrease in MTO average fee from 18.32 AUD to 5.36 AUD. This is due to Western Union’s fee dropping from 35.00 AUD to 5.00 AUD for cash transfers, which consequently led to the drop in the MTO average total cost for this country from 9.18 per cent to 2.67 per cent. This change has positioned Kiribati to be one of the first countries to meet the United Nations Sustainable Development Goal 10.C to reduce transaction costs for migrant remittances to below 3 per cent.

The lower costs of transferring from Australia and New Zealand despite the COVID-19 pandemic is largely caused by the increase in services offered in the region. New digital and online services such as money transfers through mobile wallets like the aforementioned Vodafone M Paisa has made remittances more accessible and affordable. This inverse relationship between the number of services offered and the MTO average total cost of remittances is apparent in the charts below combining Australia and New Zealand. The difference in average costs between agents and online services further highlights the cost efficiencies offered by the latter, which will become more necessary in the current and post-pandemic world.

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Additionally, the performance of the Australian Dollar and its appreciation may have incentivised Pacific communities overseas to send money back home. This is evidenced by the 2.92 per cent increase in the average amount received by Pacific communities back home in exchange for 200 AUD. The movement of the New Zealand Dollar against the Pacific currencies are more dispersed compared to the AUD but on average has increased by 0.34% overall. Thus, the changes in exchange rates have also favoured the Pacific diaspora in sending remittances home despite the pandemic.

Having more ways to send and the reduction of the cost of sending money home are good news in the midst of the devastation caused by the COVID-19 pandemic this year. These will provide greater opportunity for migrants to send more money back home for less this International Migrants Day.

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