The last year has thrown the money transfer market into a state of flux. Online companies are challenging the near-monopoly held by a few firms and banks, putting the consumer back in control of their money with a greater focus on transparency.
High street banks and companies such as Western Union and MoneyGram have dominated the money transfer market for years, while charging hefty fees.
The existing fee structure is a problem for those sending remittances to friends and family abroad, especially migrant workers.
According to a 2014 World Bank report, the average transfer fee is around 8 per cent. But in some remittance corridors in Africa, the fee is over 20 per cent.
“Forcing migrant workers to pay as much as $50 to send $200 is wrong, especially when they are sending salaries they have earned in the hope of supporting their families back home,” the World Bank said in a report.
“There is a social cause here,” agreed Rajesh Agrawal, founder and CEO of money transfer company Xendpay.
Agrawal’s company claims to offer a competitive exchange rate by tacking consumer transfers onto the larger sums of money sent by corporations on its sister platform RationalFX. Customers are also asked to ‘pay what you like’ for the service.
“Nearly $500 billion is transferred abroad each year, 80 per cent of which goes to emerging markets. If transfer costs were brought down, an extra $40 billion would go to developing countries.”
“These days, with technology as it is, the actual cost of money transfer can be very small,” Agrawal added.
“But traditionally any money transfer company makes money from two things: the mark-up when changing money from one currency to another, and the fees charged for transferring it,” he said.
A lack of competition and transparency in the industry has meant migrant workers and holiday-makers alike have had no choice but to pay high fees.
But several online money transfer businesses such as Xendpay, Azimo, Transferwise and WorldRemit are disrupting the industry, offering a welcome alternative for those transferring money abroad.
Azimo predominantly serves migrant workers in the service industries, sending money back to Poland, Africa, Latin America and the Far East.
More than $500 billion dollars are sent in remittance worldwide every year, according to online money transfer company Azimo’s co-founder and head of operations Marta Krupinska. In 2016, remittances will rise to $700 billion, she added at last month’s The Future of Fintech is Now event.
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