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… read it below or add one }

Pura_Vida November 21, 2015 at 4:32 pm

There are still big problems in cost and choice, mainly because of hidden fees.. Money Transfers cost worth $34 billion per year – Average 7,7%. World Bank goal to achieve by 2020: Getting Smart About Reducing Remittances Costs (have a look here: http://www.huffingtonpost.com/gloria-grandolini/getting-smart-about-reduc_b_7582584.html).
According to the World Bank Blog up to $30 billion could be saved on remittances. Now some startups and companies are working on this problem, trying to find pain relievers for migrants/students/expats who need to send money abroad such as:
Transferwise (P2P remittance company), Azimo, Xoom & Xendpay (traditional remittance companies) and finally Moneytis.com (Money Transfer Comparison Platform).

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