Why are international remittance fees so expensive?
Cross-Border Payments
Asked by Question Bot04/Jan/20151 answer
1 Answer
F
Faisal Khan
Answered 04/Jan/2015
It depends. In certain countries, cost of doing business has gone up. In most, it has gone down.
It all has to do with costs and the market situation of the remittance corridor in question.
If for example someone can charge CAD$ 25 for a CAD$ 100 remittance from Canada to Senegal and people pay (reluctantly?) then it means, that this particular corridor has very little competition and/or traffic.
The benchmark for Remittances is Western Union (whether we like it or not). You are in the hot zone if you can see remittances prices less than Western Union's and equating to roughly 1% to 3% of the value of the transaction.
With more and more regulator clampdown and to mitigate fraud, instant payouts, etc. MSBs now have to hire Compliance Officers, retain strict logs and records of transactions, use technology to connect with various settlement partners, have access to real-time databases for Remitter/Beneficiary checks against blacklists, provide pre-funded accounts in the beneficiary country for instant payouts, licensing costs, etc.
All this costs money. Many akin Money Service Business to being bloodthirsty businesses. That is a very unfortunate and incorrect comparison. Sure, there are some who do charge excessively, and some who will milk you out because of the desperation you are in, or your status (non-banked, etc.) but by and large, money services businesses provide a quality service for the diaspora community worldwide.
However, on the whole, remittance prices have gone down. Not up.
It all has to do with costs and the market situation of the remittance corridor in question.
If for example someone can charge CAD$ 25 for a CAD$ 100 remittance from Canada to Senegal and people pay (reluctantly?) then it means, that this particular corridor has very little competition and/or traffic.
The benchmark for Remittances is Western Union (whether we like it or not). You are in the hot zone if you can see remittances prices less than Western Union's and equating to roughly 1% to 3% of the value of the transaction.
With more and more regulator clampdown and to mitigate fraud, instant payouts, etc. MSBs now have to hire Compliance Officers, retain strict logs and records of transactions, use technology to connect with various settlement partners, have access to real-time databases for Remitter/Beneficiary checks against blacklists, provide pre-funded accounts in the beneficiary country for instant payouts, licensing costs, etc.
All this costs money. Many akin Money Service Business to being bloodthirsty businesses. That is a very unfortunate and incorrect comparison. Sure, there are some who do charge excessively, and some who will milk you out because of the desperation you are in, or your status (non-banked, etc.) but by and large, money services businesses provide a quality service for the diaspora community worldwide.
However, on the whole, remittance prices have gone down. Not up.