The BBC reports today** that migrants to the UK send £8bn to family each year. UNESCO calculate that the average transaction fees applied to international money transfers amounts to 7% of the total transaction. That means a whopping £560 million is lost to transaction fees every year. When you also consider that 30% of that money is sent back to get younger family members through education, it's a huge loss to those that are often required to work extremely hard to earn the money they send back in the first place. According to the Association of UK Payments Institutions, increased competition and lower rates would be available if regulators allowed more companies to compete in the market.
Following this report, money transfer comparison site, Xompare.com has run a rates and fees analysis to understand how money transfer providers listed on their site perform. In contrast to what has been reported on the BBC today, the analysis reveals that spreads for a low value Pound (GBP) to Indian Rupee (INR) transfer across all listed providers range from 0% to 2.5% , with the average spread across all providers being 0.92% .
David Noble, Co-founder of Xompare.com says, "It is a common misconception that there is not enough providers to ensure competitive rates are offered to consumers, and in particular migrants sending money home. There is already fierce competition among money transfer providers and it pays to take advantage of this. The real challenge is not many people are aware of the options available to them Too many people focus on either the spread associated with a foreign exchange rate or the transaction fee, when in reality you need to focus on both. Ensuring you understand all of the fees involved in sending money abroad is key to getting the cheapest deal for international money transfer "
Tips from Xompare for finding the cheapest way to send money abroad:
Always compare money transfer providers and make sure you know the differences between rates and fees in order to choose the best deal for you.
Don’t assume that one particular provider is always the most favourable. Certain providers are either more or less competitive when considering the currency of the payment, amount being transferred, and the method of settlement.
Avoid transferring small amounts of money too frequently. Transferring large amounts less frequently will save you money on fees that are charged per transaction.
If you not in a hurry, keep an eye on fluctuating foreign exchange rates and time your money transfer when rates are in your favour.
Be mindful and pay attention to the total cost. The fees may be low but the exchange rate may be unfavourable or vise versa. Watch out for additional fees that may be incurred whilst your payment is in transit and remember that some money transfer providers will protect against these 'lifting fees’.