Understanding The Hidden Costs And Overlooked Expenses Of Remittances
Understanding The Hidden Costs And Overlooked Expenses Of Remittances
A remittance is a sum of money paid by a person from one country to a person in another country. There are many ways of transferring money overseas, and with the evolution of the Fintech industry, we are working on better solutions every day.
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Understanding the Cost of Remittance
Globally, over 200 million migrant workers send money home to over 800 million family members – mostly in developing nations. Out of the total $212 billion remittance outflows from 12 G20 sending countries, $12 Billion are paid in remittance fees. For every remittance transaction, there is a cost that includes a fee charged by the sending agent, typically paid by the sender, and a currency-conversion fee for delivery of local currency to the beneficiary in another country.
Understanding Wire Transfers
Wire transfers use high-end cross-border payment software to send money overseas safely and quickly. Wire transfers work similarly to local money transfers. The money is sent and received via messages across different banking networks like SWIFT or PEACH. Remittance requires a delivery intermediary to make the transfer. Remittance services like Western Union Money Transfer, MoneyGram, TransferWise, Remitly etc., do the job of intermediaries. They make it possible for person A to deposit cash in country A and send it to person B in country B.
Elements of Remittance Fees
Here are the different elements of remittance fees that add up to the total charges you pay when making a remittance.
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Remittance and the Hidden Cost
The lack of transparency also prevents us from drawing definite conclusions about the most economical option for remittance. Even after understanding the elements of the remittance cost, it is possible that you are charged higher than the estimated cost quoted by your bank or service that sends money. The provider often lists market volatility and the factors that affect the final FX rate.
What is the spread?
The gap between the sell rate and the buy rate when exchanging or trading currencies is known as the forex spread. Depending on the currency being transferred, the time of day, and the state of the economy, spreads can be either narrower or broader. The spread and its impact on remittance costs are best understood with an example.
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The spread is where most of the money that remittance companies make their money. The fixed fees decrease in importance as the amount transferred increases and the cost % increases.
How to Reduce Remittance and Wire Charge Hidden Costs?
One should evaluate the costs of several service providers before sending money. They will provide all the information you seek, even if it is not immediately available. Here are some additional methods for sending money abroad without incurring additional fees.
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Conclusion
We will undoubtedly discover new technology and ways to reduce the cost and simplify the process of remittance as the world's financial infrastructure develops. Remittance seekers have a more open and affordable option with independent suppliers. Possessing the right information can help you avoid paying remittance fees that are not necessary.
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