Why are Cross-border payments so Expensive?

A recent article in The Economist on 'cross border payments' pointed out that the cost of transferring money between consumers and small business in G7 countries can now cost as little as 2% or less. However, the cost for migrants to send money home is still way above this.

The figure quoted in the article is 7%, but within that average are some outliers that are even higher – UK to Nigeria cash transfer for example costs around 8.5% of the transaction value.

 Economist Article-1


What was most interesting in this article is this 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 compared 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 are for the people who receive 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.

Read the Original Article here


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