Calls for more transparency in global money transfer markets

by Ray Clancy on October 7, 2015

For expats, transferring money from one country to another can be a major headache with banks and brokers all offering different rates.

Now there have been new calls for new regulations to address the differences in remittance fees and for an examination of the current system which some say has allowed effective monopolies to exist.

EUROmoneyThe global money transfer business is estimated to be worth £400 billion, but fees vary enormously from around 3% to 20%, with companies transferring into Africa charging the most.

“What we are seeing is a huge variation in fees and customer rates between territories that exploits and disadvantages clientele. Our global average cost for sending remittances is 2.09%. We see no reason why any money transfer business should be in a position to charge more than this,” said Sudhesh Giriyan, chief operating officer of Xpress Money.

In 2009 the G8 set a target of reducing average charges to 5%, but that is nowhere near being reached yet. “We see intensive lobbying in this sector, creating effective monopolies in some countries that exploit those in need,” Giriyan added.

The worst rates are connected with money being sent to developing countries. With around one in 10 people globally sending or receiving remittances, sums sent to developing countries alone are around £289 billion, according to recent World Bank estimates.

As well as banks, which tend to offer less competitive transfer rates but are regarded as highly secure, there are money brokers who tend to be highly competitive and money transfer services operated through convenience stores which may not be as competitive but offer other services such as cash in hand and delivery services.

Hidden charges on international money transfers are costing UK consumers £2.88 billion every year, and affecting eight million people, according to research from peer to peer international money transfer platform TransferWise.

The firm is also calling for change, in particular an end to the hidden costs banks and money transfer companies place on pricing in international transfers and travel money. It wants to see greater transparency to charges and fees applied to foreign exchange transactions.

“With a monopoly on financial services, high street banks have been able to overcharge and under serve consumers. There’s a complete lack of transparency in the sector. Consumers are often completely unaware of what the banks are charging them,” said Taavet Hinrikus, chief executive officer of TransferWise. “That needs to change. This affects millions of people every year from students studying abroad to pensioners who have retired overseas. Consumers have the right to know what they’re being charged and what exchange rate they’re getting.”

United Nations secretary general Kofi Annan has called for a formal investigation by London financial regulators into some operators, specifically those offering money transfers to African countries.

He said that exorbitant fees levied on Africans working in the UK to send their money back home should be investigated, while the big money transfer companies should be investigated for monopolistic practices.

Africans send an estimated $5 billion a year from the UK back to their home countries, however, money transfer companies typically charge around 8% per cent for the service on top of often undisclosed currency exchange costs which can make up a further 3% to 5%.

{ 1 comment }

Thumbnail image for Being an expat is nothing new and nothing out of the ordinary, says new research

Being an expat is nothing new and nothing out of the ordinary, says new research

September 29, 2015 Africa

Being an expat or migrant might seem like a very recent phenomenon but now research reveals how it has been going on for thousands of years and been normal rather than exceptional. Genetics researchers at the UK’s Oxford University have used DNA to map the history of population movements in and around Europe and say […]

Read the full article →
Thumbnail image for More South African expats are being tempted back by a homecoming campaign

More South African expats are being tempted back by a homecoming campaign

August 19, 2015 Africa

More South African expats are being tempted to return home by highly skilled jobs especially in engineering, finance, medicine and construction, recruitment experts suggest. Overall more than 400,000 white expat South Africans have returned since many left due to the financial crisis in 2009 for better job prospects and pay abroad. Now data from Statistics […]

Read the full article →
Thumbnail image for Senegal named top African country for expats

Senegal named top African country for expats

July 14, 2015 Africa

African countries are not always top of mind for would-be expats, mainly due to security concerns, but new research show that many are satisfied with their jobs and career prospects. Senegal and Nigeria are high on the list for job satisfaction and personal finance according to the survey findings, with the majority of expats thriving […]

Read the full article →
Thumbnail image for New York, London and Paris still top global cities

New York, London and Paris still top global cities

May 5, 2014 Africa

If you want to live and work in one of the top global cities then New York, London, and Paris are still your best bets, but within 20 years, it might be Jakarta, Manila, Sao Paulo, New Delhi or even Addis Ababa. New York and London remain the world’s most global cities, closely followed by […]

Read the full article →