{"id":29018,"date":"2020-01-18T08:50:30","date_gmt":"2020-01-18T13:50:30","guid":{"rendered":"https:\/\/www.escapeartist.com\/?p=29018"},"modified":"2020-09-18T03:33:16","modified_gmt":"2020-09-18T08:33:16","slug":"remittance-transfer-markets-the-existing-problems-for-immigrants","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/remittance-transfer-marketsstop-paying-exorbitant-fees\/","title":{"rendered":"Remittance Transfer Markets\u2014Stop Paying Exorbitant Fees"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">I recently came across this article by the World Bank, which said that a <\/span><a href=\"https:\/\/www.worldbank.org\/en\/news\/press-release\/2019\/04\/08\/record-high-remittances-sent-globally-in-2018\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">record-high $689 billion<\/span><\/a><span style=\"font-weight: 400;\"> were transferred as remittances across the world\u2014the corresponding <\/span><a href=\"https:\/\/www.economist.com\/leaders\/2019\/04\/13\/the-cost-of-cross-border-payments-needs-to-drop\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">cost of these remittance transfers<\/span><\/a><span style=\"font-weight: 400;\"> was 8\u201312% of the amount sent.\u00a0<\/span><span style=\"font-weight: 400;\">These figures mean that you effectively pay up to $12 on every $100 transferred.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As an expat, if you\u2019ve got to send money back home, this is a huge price to pay because you\u2019re left with only 92% &#8211; 88% of your disposable income to send back. This is straight-up extortion, and with all the income taxes and sales taxes people need to pay, the cost of money transfers is just another added financial hassle.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I\u2019ve been helping a lot of people figure out ways to reduce the cost of transferring money for both business and personal purposes. I\u2019ve seen the numbers and the costs, and they\u2019re <\/span><i><span style=\"font-weight: 400;\">huge\u2014<\/span><\/i><span style=\"font-weight: 400;\">enough to compel me to write an article analyzing how the money transfer market functions.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Inefficiencies In The Remittance Markets<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">As it stands, there are three different methods of remittance transfers:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Private Banks<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Money Transfer Operators<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Fintech Remittance Service Providers<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In addition to the taxes on money transfers, you have to factor in the prices charged by service providers <\/span><a href=\"https:\/\/files.consumerfinance.gov\/f\/2011\/07\/Report_20110720_RemittanceTransfers.pdf\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">before and after<\/span><\/a><span style=\"font-weight: 400;\"> a transaction\u2019s made.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">World-renowned financial consultancy, EY, observed that money transfer service providers charged up to <\/span><span style=\"font-weight: 400;\">2%\u201311%<\/span><span style=\"font-weight: 400;\"> as profit margins as well as foreign exchange rate charges to their services. These charges are significantly higher for the services offered by private banks that might even go higher than the 11%.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When you compare the cost of money transfer services offered by banks and money transfer operators with those of Fintech service providers, a stark contrast comes to light.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to figures from a couple of years ago, the recipients were <\/span><a href=\"https:\/\/www.devex.com\/news\/5-trends-affecting-the-remittance-industry-89275\" target=\"_blank\" rel=\"noopener noreferrer nofollow\"><span style=\"font-weight: 400;\">losing up to $32 billion<\/span><\/a><span style=\"font-weight: 400;\"> to cross-border transfer costs across the world; Fintech can significantly reduce these losses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">My point here isn\u2019t to bring to light how Fintech can help people out; it can. The more important observation is how market inefficiencies are costing you a lot of money.\u00a0 This comparison helps us identify why these problems aren\u2019t going away.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Time Lags Between Transfers<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The same EY report I quoted above also says that people have to wait between three to five days until transactions are completed. There is a huge opportunity cost associated with remittance transfers; the time lost increases the potential for the following problems:<\/span><\/p>\n<h3><b>Variations In Exchange Rates<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Let\u2019s say you want to send money from the US to your family in Japan\u2014the exchange rate is roughly $1 to \u00a5110.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For one thing, a bank or a money transfer operator won\u2019t charge the same exchange rates. Either of these two service providers will charge you an exchange rate, which also includes their fees\u2014probably something around $1 to \u00a5120.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the three to five days that the transaction takes, there is a significant possibility of the Base Exchange rate rising. When you took your money to your service provider, you were working with $1 to \u00a5110, the bank will not bear the increase in the exchange rate of 10 Yen\u2014you\u2019ll have to pay it.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Higher Risk Of Fraud<\/strong><\/h3>\n<h3><b>Higher Risk Of Fraud<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The high mark-ups charged by service providers effectively exclude a large portion of people trying to send money abroad. This isn\u2019t directly influenced by the time-lags, but the uncertainty of exchange rates combined with the mark-up makes people reconsider whether they ought to work with traditional transfer channels. Instead of going through official routes, they take the cheaper, but less monitored path to transfer their money. They might entrust their money to someone who carries their money abroad and can\u2019t be tracked. Millions are lost in fraud as their \u201cmule\u201d basically vanishes off the radar.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Structural inefficiency of the system that penalizes people for sending money abroad\u2014without good reason\u2014increases the risk of fraud. The time lag, which subjects people to foreign exchange market uncertainty, works in tandem with high service charges, to force them down a path where they might lose far more money.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Some Advice For The Perpetual Traveler<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">If you\u2019re living abroad and want to transfer money back to your family, you should thoroughly consider the possibility that you\u2019ll have to pay a lot of money. If you\u2019ve done this before, then you probably understand the problems associated with sending money abroad and the hassles that come as part of the package. With this knowledge in hand, you should search for service providers who minimize the costs of money transfers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I\u2019ve recently associated myself with the people at <a href=\"https:\/\/www.moneycorp.com\/en-us\/campaigns\/partners\/partner-generic-usd\/?rp=0020800758\" target=\"_blank\" rel=\"noopener noreferrer\">MoneyCorp<\/a> &#8211; <\/span><span style=\"font-weight: 400;\">the same people who own Thomas Cook.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company offers personal money transfer services to reduce the costs associated with remittance transfers. They offer an online money transfer service that can help you minimize the risks of higher foreign exchange rates by locking in your preferred exchange rates, forward contracts, and much more.\u00a0 You should speak to them if you want a low-cost solution to your remittance-related cost problems.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>In Conclusion<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">As a financial libertarian, I don\u2019t approve of how governments and the banks who control the game extort people with their service charge rates. While these are private institutions, they\u2019re the worst kind because they work in cooperation with a state system that\u2019s already trying to take your money away.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Whenever you\u2019re thinking of sending money abroad, consider your options. Check the fees, timing and security involved to send your money back home.\u00a0\u00a0<\/span><\/p>\n<p><strong>Make sure you contact MoneyCorp.\u00a0 <a href=\"https:\/\/www.moneycorp.com\/en-us\/campaigns\/partners\/partner-generic-usd\/?rp=0020800758\" target=\"_blank\" rel=\"noopener noreferrer\">Here is their contact information.<\/a> I know you&#8217;ll love their service, I did, and I loved the savings that my family got from using their service. I would rather have the money in my pocket than in the banks!<\/strong><\/p>\n<p><strong>I hope you enjoyed reading: Remittance Transfer Markets\u2014Stop Paying Exorbitant Fees<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I recently came across this article by the World Bank, which said that a record-high $689 billion were transferred as remittances across the world\u2014the corresponding cost of these remittance transfers was 8\u201312% of the amount sent.\u00a0These figures mean that you effectively pay up to $12 on every $100 transferred.\u00a0 As an expat, if you\u2019ve got [&hellip;]<\/p>\n","protected":false},"author":678,"featured_media":32066,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[9410],"tags":[],"yst_prominent_words":[9965,9964,9966,9967,12644,19339,17736,9962,9968,9969,9970,9973,9972,19338,11156,17737,9971,4992,9963,11950],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2020\/01\/wire-transfer.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/29018"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/678"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=29018"}],"version-history":[{"count":18,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/29018\/revisions"}],"predecessor-version":[{"id":37605,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/29018\/revisions\/37605"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/32066"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=29018"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=29018"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=29018"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=29018"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}