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.