Tempo Money Transfer expects decline in the Russian remittances market to slow down in 2016
One of the largest European remittances markets, Russia, will demonstrate a slowdown in decline in 2016, the experts at Tempo Money Transfer say. However, the segment will still decrease in the current year.
By: Tempo Money Transfer
Due to sanctions and local currency devaluation against the American dollar, the volume of remittances of the CIS top donor country fell from over $20 billion in 2014 to $13 billion in 2015.
"The economy slightly adapted to the negative trends and demonstrated a few positive signs in the current year. However it is way too early to talk about full recovery," Souren Hayriyan, member of the board of directors of Tempo Money Transfer, said.
The company expects the decline to slow down and sees the remittances volume at $10 billion in 2016, still a 23 percent decline compared to a year before.
The ruble devaluation is the main reason for this, Tempo says.
Since 2013, when remittances reached its $27 billion maximum, the market volume decreased by nearly 3 times.
The number of transactions is also expected to decrease, by around 20 percent, Hayriyan of Tempo said.
Its decline is due to the Russian market now being much less attractive for working migrants after the crisis started. He went on to say that they originate over 80 percent of demand for the money transfers in the former USSR countries.
Another trend is the increase in average number of transactions. In 2015, the Russian government introduced licenses for working migrants, requiring a fixed annual fee for the right to remain in the market, regardless of income. This made life more difficult for low-income migrants. The migrants' incomes remained the same, which whittled away at remittances of low income workers. It contributed to the decline in transaction numbers, while increasing the average cheque (from $380 in 2015 to $ 420 in 2016).
Hayriyan said also that competition drastically increased. Some companies have introduced tariff-free remittances, making money on exchange rates only.
Summarizing, he said that it is now very difficult to make any further predictions on what direction the market will go. "In such a situation when the economy goes through what is not the best time in general, the remittances market will generally follow the same path."