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Sudhesh Giriyan, COO, Xpress Money

A flawed system

Sudhesh Giriyan
Sudhesh Giriyan

In 2009 the G8 set a target of reducing average remittance charges to five percent.  However, six years on and we are still woefully short of that target. Candidly, we have seen intensive lobbying in this sector, creating effective monopolies in some countries that exploit those in need.

In many cases, the funds being transferred are sent by low-paid workers seeking to assist family members in their native countries.  Sums that are transferred are often relatively small, and it is extraordinary that some businesses in our sector choose to exploit their customers and charge the fees that they do.

The average cost for sending remittances globally is around 7.6% – a figure that has largely been inflated by costs charged in sub-Saharan Africa which, in some cases, amount to as much as 20%.  This could mean that if someone were to work 40 hours a week for minimum wage and sent all of it to their family living in sub-Saharan Africa, they might be charged £53.60 in remittance fees, equating to a full days’ work.

A global issue

Despite the economic and financial crisis of 2008, global migration continues to rise, with some 232 million migrants – that’s over 3% of the world’s population, crossing oceans, mountains, and deserts to live and work outside their country of origin[1].

The UK has a fantastically diverse immigrant community amounting to approximately 13% of its population[2]. The majority of these are shown to have crossed international borders in search of better opportunities, particularly for employment – a keen motivation for migrants’ relocation to the UK since 2012[3].

Over 70% of them send money home on a regular basis – a market now worth more than £400 billion globally.  A staggering £15bn is sent from the UK every year, with an estimated two-thirds transferred to developing countries according to recent World Bank estimates.

Seen as both simple and convenient, money transfer services are an established method of transferring money between families and friends internationally.  Growing increasingly popular in the expatriate Asian, African and Eastern European populations within the UK; these services are typically operated through convenience stores, where a customer visits a local store, arranges the transaction in moments, and where (in most cases) the funds are immediately available to the recipient in either cash payments or in a bank account, on a mobile wallet or remit card.  Delivery services to the recipients’ homes are also available in some receiving countries.

Depending on the recipient country, these transfers can have a huge impact on national capital; India, for example, received 70 billion dollars last year – larger than its IT exports, whereas in Tajikstan, remittances equated to 42% of its GDP[4].  In smaller, more fragile countries, remittances are a lifeline; acting as insurance for families facing hardships or unexpected expenses.

As claimed by lead World Bank economist, Leora Klapper[5], the global remittance market also presents “dramatic opportunities for groups looking to expand financial inclusion within under-represented and under-served communities”.

What we’re seeing however, is a wilful disregard of both the circumstances surrounding (and the regularity of) payments, and a subsequently huge variation in fees and customer rates between different international territories. This means that some money transfer companies are able to exploit not only the remittance system and its users, but directly disadvantage their own clientele, eroding confidence and trust in the service as a whole.

The way forward

We agree with former UN Secretary General, Kofi Annan – one of the greatest advocates for reform and who only last year called for a formal investigation by London financial regulators.  He argued that reforming the money transfer system and regulating the charges made on international remittances is of key importance to the health and ongoing prosperity of the remittance market.

Pulling back the lens, this doesn’t stop with regulatory reforms.  We are seeing new opportunities in this global marketplace as more and more people choose to do things on-the-go, leveraging digital platforms in all sorts of ways.  Transactions of every nature; from grocery shopping to banking and social exchanges are happening all of the time via apps and online channels.

We believe conventional modes of money transfer will continue to enjoy a broad customer base, but there is a huge opportunity for money transfers in the digital space, as people want a more convenient option for sending money.  The modern customer is busy and may not have the time to visit a physical location to send or receive money.  Xpress Money has been focussed on ramping up its digital money transfer offerings and our new platform called XOPO, is the result of that endeavour.

XOPO is designed for this new digitally savvy customer.  It’s a global platform enabling secure payments across social networks and messaging apps. The UK is the first market in the world from which users can send money internationally, across popular social networks.   Our customers can send up to £3,000 abroad instantly simply by sending a message or a status update.  Users can also send digital content – photos, videos, messages, along with the money transfer – adding emotions and experiences to the transfer process.  Whether you are sending £300 or £3,000, XOPO charges a flat fee of £2.99 on money transfers using the app.

We have also launched self-service kiosks in Australia, which are placed in popular convenience stores that users can build their money transfers on.  The aim is to take this kiosk model to other countries such as the UK in the near future.  This is about giving control back to the customer – they are in charge of when, how and who they want to send money.

Our global average cost for sending remittances via Xpress Money is 2.09% and we see no reason why any money transfer business should be in a position to charge substantially more than this.  This increasing demand for digital channels of money transfer will definitely work towards lowering the costs of sending remittances – something we welcome.