Indians paid ₹263 billion in foreign exchange fees in 2020: study
NEW DELHI :
Wise, a global payments company, has released a new study commissioned by it, which has revealed that Indian consumers paid more than ₹263 billion as foreign exchange fees in 2020, of which roughly ₹97 billion was hidden as exchange rate markups on currency conversions, payments, and card purchases. The remaining ₹166 billion was spent on transaction fees.
These figures are from the independent research carried out by Capital Economics in August 2021 which aimed to estimate the scale of foreign exchange transaction fees in India. On a base of about ₹80 billion of inward remittances and ₹7 billion in outward remittances, this translates to about 4% in costs.
A 2018 study by the Reserve Bank of India on inward remittances cited World Bank data, which showed that the average cost of sending ₹500 to India declined from 4.9% in 2013 to 3.3% in 2018. However the cost varies according to region and mode of transfer. Typically, outward remittances have higher costs of transfer.
A significant portion of these fees paid on remittances to India come from people in Gulf countries, most of whom are employed in blue collar jobs to support their families back home in India, the study showed.
Of the share of total fees paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by the US (18%), United Kingdom (15%), Qatar (8%), Canada (6%), Oman (5%), United Arab Emirates (5%), Kuwait (5%), and Australia (4%).
The study also revealed that pre-pandemic, Indian travellers spent ₹42 billion in foreign exchange fees in 2019 alone, of which ₹24 billion is hidden in exchange rate markups.
Most people today are unable to understand the actual costs of sending money abroad due to a continued lack of transparency around fee structures. There are two costs associated with foreign currency transactions: the upfront transaction fee and the exchange rate.
The upfront fee can vary but would often not represent the total cost of the transaction as traditional banks and providers tend to add an undisclosed markup on the exchange rate, instead of using the fair, mid-market rate. The difference between rates result in a hidden fee, which unnecessarily costs people a lot more when sending money abroad, a release issued by Wise added.
Commenting on the survey, Rashmi Satpute, country manager, Wise India, said, “While technology and internet have eased some issues related to the convenience and speed of foreign funds transfers, the age-old practice of hiding fees in the exchange rate results in people spending too much on hidden foreign currency fees—money which should rightfully stay in their pockets.”
Co-founded by Taavet Hinrikus and Kristo Käärmann, Wise launched in 2011 under its original name TransferWise. It is listed on the London Stock Exchange under the ticker, WISE. 11 million people and businesses use Wise, which processes over £5 billion in cross-border transactions every month, saving customers over £1 billion a year, according to the release issued by the company.
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