Sending money abroad, also known as remittances, is a common practice for many individuals and businesses. However, the costs associated with these transactions can vary greatly depending on the method and provider used. According to a report from the World Bank, the global average cost of sending $200 was 7.09% in the first quarter of 2021. This means that for every $200 sent, $14.18 is lost in fees and exchange rates.
One of the main factors that determines the cost of a remittance is the method used. Traditional methods, such as bank transfers and money transfer operators (MTOs), tend to have higher fees and exchange rates compared to digital platforms and mobile wallets. For example, according to a report from Boston Consulting Group, the average cost of sending $200 via a bank transfer is 9.2%, while the average cost of sending the same amount via a digital platform is 5.1%.
Another factor that affects the cost of a remittance is the destination country. Developed countries tend to have lower costs compared to developing countries, as the infrastructure and regulation in developed countries are more advanced. According to a report from Bain & Company, the average cost of sending $200 to a developed country is 6.2%, while the average cost of sending the same amount to a developing country is 8.6%.
However, it's important to note that not all digital platforms and MTOs are created equal. Startups and new players in the market, such as TransferWise, WorldRemit, and Remitly have disrupted the remittance industry by offering lower fees and transparent exchange rates. According to a report from Y Combinator, these startups have grown rapidly in recent years and have captured a significant market share.
In conclusion, the cost of sending a remittance can vary greatly depending on the method and provider used. While traditional methods tend to have higher fees and exchange rates, digital platforms and new players in the market are offering more competitive options. It's important to do your research and compare the costs and exchange rates before sending a remittance.