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Remittances Reach All-Time High

Remittances to low and middle-income countries reached a record high last year, the World Bank has said. Average transaction costs remain high, with an average of 7 percent paid to transfer $200 or equivalent.

 

Remittances to low and middle-income countries reached a record high of $529 billion in 2018, the World Bank reports—that’s an increase of nearly 10 percent on the previous record of $483 billion set in 2017. Total remittances were up to $689 billion, from 2017’s $633 billion.

Increases were driven by strength in the US economy, as well as a revival in remittances from Russia and the Persian Gulf nations of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Inward remittances are growing most in South Asia, World Bank data shows (up 12 percent last year) and top destinations for “funds for folks back home” were India, China, Mexico and the Philippines.

Remittances have grown rapidly in recent years and, per the IMF, now represent “the largest source of foreign income for many developing countries.”

Despite an ongoing revolution in the payments industry, the cost of sending money home remains high. According to the World Bank, on average, it cost 7 percent last year to send $200 or equivalent.

Banks, as always, were the most expensive way to send money, with costs 57 percent higher than average.

FX services offered by banks are famously expensive. World Bank does not state as such, but its numbers imply bank transfer costs that were 3-4 times higher than those for remittance agents or other payments specialists. For simplicity’s sake, that calculation assumes 50 percent of transactions were handled by banks, and though not intended to be accurate, it is perhaps being too generous: for many currency routes, banks are known to charge 6 times more than digital rivals.

Though some of the most expensive currency routes are unavailable with the likes of TransferWise, WorldFirst and OFX, some are, and it makes all the sense in the world to compare money transfer costs before contacting a bank. Consider, for example, that a transfer of GBP 5,000 to Nigeria costs just 1.2 percent with OFX and a transfer of GBP 1,000 to the Philippines costs even less with WorldFirst, at 0.9 percent.

 

Further Reading

 

Fintechs vs. Banks: Remittance War Rages On as FX Costs Slashed for Millions

For many currency routes, FX costs have been slashed in recent years by a number of industry-disrupting fintechs, allowing such firms to slice great chunks from the banking sector’s lucrative remittance markets. Banks are fighting back, though, by developing low-cost, digital offerings of their own.

Last update: 19 May, 2019

WorldFirst add Hong Kong Dollar and Chinese Yuan to World Accounts

WorldFirst add Hong Kong Dollar and Chinese Yuan to World Accounts

World Accounts now let your business collect funds and pay local suppliers in HKD or make payments to offshore CNY (CNH) accounts in China.

Last update: 16 May, 2019

OFX Global Currency Account – BER Review

OFX Global Currency Account – Independent BER Review OFX Global Currency Account: A Summary OFX has a 30-year history and is one of the largest foreign exchange specialists in the world. It offers a “Global Currency Account” (GCA) that allows businesses to hold, send and receive funds in 6 major currencies (GBP, EUR, USD, AUD, […]

Last update: 21 May, 2019

  

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