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As the need for more customer-friendly international money transfers has grown, so have the number of financial start-ups offering banking alternatives. But which mode of remittance is the best? A new World Bank report sheds light.

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The Cost of Remitting Money

For many of us, sending money abroad or receiving payments from a family member or a business partner in another country is relatively common. However, with each avenue, how does it differ in terms of costs?

“Fees have always accounted for a large portion of the costs for remittance services. Moreover, costs for non-digital services are consistently higher than those for digital services regardless of the region where the money is being sent to,” said Matt Simeon, a UAE-based forex analyst.

Banks Remittances Get Costlier in 2024

Banks remained the most expensive type of service provider at the start of 2024 when it comes to remitting money back home, the latest report from World Bank noted. The World Bank’s Remittance Prices Worldwide (RPW) tracker indicated an average cost of 12% when remitting $200 (Dh735) from banks at the start of 2024.

How High is this Bank Remittance Charge?

But how high is 12% and how much of your hard-earned income is shelled out in transaction costs to the bank? Compared to banks, it costs less than half as much at money exchange houses, at 5.5% when remitting $200 (Dh735), while mobile remittance applications charge a cost of 4.4% when remitting the same amount – making this the cheapest type of remittance service provider.

What Avenues are Cheaper to Remit in 2024?

The World Bank analysis further indicated that over time, banks, mobile operators, and exchange houses have seen a general decline of total average costs, but until the start of 2024, banks have been firmly above the global average, whereas exchange houses and mobile operators have remained below.

Why Banks Prove Most Reliable at Remittances?

“Regardless of where you have an account, it is observed worldwide that banks offer poorer exchange rates. So If you’re exchanging money through your bank, you’re probably not getting the best deal on exchange rates as you would through specific money transfer services,” opined Anil Pillai, a Dubai-based forex analyst.

How Much do UAE Banks Charge for Remittances?

“Overseas transfers via bank are often fast, and some UAE banks keep rolling out products to compete with exchange houses,” added Simeon. “Most UAE banks follow the ‘interbank rate’, which is the price at which banks trade currencies with each other, and then base their own rates around it.

What do UAE Experts Suggest Remitters Do?

If a remittance service provider set their own exchange rate, it will often be quite a bit more than the forex market rate. “Once you have information of the exchange rate they use and the charges incurred per transaction, you can establish how much it will essentially cost you,” added Pillai.

Checklist when Sending Money Abroad

Before sending money abroad, be sure to ask your bank what their transfer charge would be for your transaction and also, and more importantly, what the recipient bank’s fee is expected to be for receiving the remitted currency.

Here’s a list of some of the most important questions you would need answered:

• Are you transferring to another currency?
• What is the current exchange rate between these currencies?
• Do you want to send a large or small sum of money?
• How speedily do you want the person on the other side to receive the money?
• Is it a once-off payment or a recurring one?
• What fees will you have to pay?
• What will the final costs be after all the fees and exchange rate?
• How safe will your money be?

How to Check if You’re Getting the Best Rate

A common comprehensive platform is the World Bank’s global cost calculator. You can use this tool by simply selecting the country you’ll be sending money to, enter the amount you would like to send and hit the ‘compare’ button.