A good article in The Economist this week on cross border payments.
As it points out, to transfer money between ‘consumers and small business in G7 countries can now cost 2% or less’. However, the cost for migrants to send money home is still way too high. The figure quoted in the article is 7%, but within that average are some outliers that are higher – UK to Nigeria cash transfer for example is around 8.5%.
What was most interesting for me in this article is the graph on fees. The banks have been consistently the most expensive way to send funds home. Why is this? Surely the international bank ecosystem is the biggest financial system in the world? It is the most established, when compare to Money Transfer Offices (MTOs) and to the new FinTechs. So why can’t they do it cheaper?
Is it because they don’t want to?
The article goes on to describe how important remittances for people in receiving them, with the $550B remitted last year to developing nations being more than the combined inward investment in those countries.
It also points out that the migrant sending the money home is often as poor as the family member receiving the money.
In a world where 9% of the population lives on less than $2 a day, the difference between a $4 fee and a $8 fee has a massive impact.
The Economist is right. More needs to be done.