Indians paid ₹263 billion in foreign exchange fees in 2020: Study

out of this roughly ₹97 billion was hidden in the form of exchange rate markups on currency conversions, payments and card purchases.

Remaining ₹166 billion was spent on transaction fees. These figures were from independent research conducted by Capital Economics in August 2021, which estimated the scale of forex transaction fees in India. Based on inward remittances of about $80 billion and outward remittances of $7 billion, this translates to about 4% in costs. A 2018 study by the RBI on inward remittances cited World Bank data showing 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 the region and mode of transfer. Generally, outgoing remittances have a higher cost of transfer.

The study shows that a significant portion of these fees paid on remittances to India comes from Gulf countries, where most people are employed in blue-collar jobs to support their families in India. In the share of total charges paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by the US (18%), UK (15%), Qatar (8%), Canada (6%). ) Was. , Oman (5%), United Arab Emirates (5%), Kuwait (5%), and Australia (4%). The study also showed that before the pandemic, Indian travelers spent ₹42 billion in foreign exchange fees in 2019 alone, of which ₹24 billion is hidden in the exchange rate markup.

Most people today do not understand the real costs of sending money overseas due to the continued lack of transparency around fee structures. There are two costs associated with forex transactions: the upfront transaction fee and the exchange rate. The upfront fee can vary but often will not represent the total cost of the transaction because traditional banks and providers add an undisclosed markup to the exchange rate instead of using the appropriate, mid-market rate. A release issued by Wise said that the difference between the rates results in a hidden fee, which unnecessarily costs people a lot when sending money overseas.

Rashmi Satpute, Country Manager, Wise India said, “While technology and the internet have eased some of the issues related to the convenience and speed of foreign fund transfers, the age-old practice of hiding fees in exchange rates has resulted in people spending a lot. are. On hidden forex fees – money that should remain in their pockets.”

Co-founded by Taavet Hinrikus and Kristo Käärmann, Wise was launched in 2011 under the name TransferWise. It is listed on the London Stock Exchange under the ticker, WISE. According to a company release, around 11 million people and businesses use Wise, which processes more than £5 billion in cross-border transactions every month, saving customers more than £1 billion per year .