The study conducted by Wise, a global technology company, revealed that between 2016 and 2020, the annual amount Indians lost in fees and exchange rate mark-ups increased from Rs 187 billion to Rs 263 billion. These figures were from an independent research carried out by Capital Economics in August 2021 which aimed to estimate the scale of foreign exchange transaction fees in India.
“Any time the rupee changes into a dollar or Euro or any other international currency or vice versa, consumers find themselves tangled in a web of hidden exchange rate markups, high fees, delays, and small print. Today’s research exposes a severe lack of transparency in foreign exchange transactions – for far too long consumers have been fleeced into paying unnecessary costs for foreign transactions when providers hide fees in exchange rate markups,” said Rashmi Satpute, Country Manager, Wise India.
Ambiguous remittance pricing structures
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.
Here is a look at more such findings from the report.
While the overall amount Indians have spent on transaction fees for sending money abroad have decreased over the past five years, the fees paid to exchange rate margins are growing. “This highlights a lack of transparency in remittance fee structures, putting consumers at risk of hidden fees as they unknowingly pay more than advertised for the remittance service in the form of a marked up exchange rate” stated a press release issued by Wise.
Total foreign transaction fees (Rs) paid on remittances from India
Over the past five years, money lost to exchange rate margins on inward remittances have grown from Rs 42 billion to Rs 79 billion. Meanwhile, fees paid to transaction costs have grown from Rs 102 billion in 2016 to Rs 140 billion in 2020.
A significant portion of these fees paid on remittances to India come from people in Gulf countries where most people are employed in blue collared jobs to support their families back home in India. “Of the share of total fees paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by United States (18%), United Kingdom (15%), Qatar (8%), Canada (6%), Oman (5%), United Arab Emirates (5%), Kuwait (5%), Australia (4%),” stated the Wise release.
The report also revealed that pre-pandemic, Indian travellers spent ?42 billion in foreign exchange fees in 2019 alone, of which Rs 24 billion is hidden in exchange rate mark-ups.
Total foreign transaction fees (Rs) paid on remittances to India
