The study by global technology company Wise showed that between 2016 and 2020, Indians lost an annual amount in fees and exchange rate mark-up increased from Rs 187 billion to Rs 263 billion. These figures were from an independent research conducted by Capital Economics in August 2021, which aimed to estimate the scale of forex transaction fees in India.
“Whenever the rupee converts to a dollar or the euro or any other international currency or vice versa, consumers find themselves entangled in a web of hidden exchange rate markups, high fees, delays and small print. Today’s research calls for transparency. exposes serious shortfalls in foreign exchange transactions – for too long consumers have been driven to pay unnecessary costs for foreign transactions when providers hide charges in the exchange rate markup,” said Rashmi Satpute, Country Manager , Wise India said.
unclear Remittance pricing structures
Most people today are unable to understand the true cost of sending money overseas due to the continuing 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. The difference between the rates results in a hidden fee, which costs people a lot when sending money abroad unnecessarily.
Here’s a look at more such findings from the report.
While the total amount spent by Indians on transaction fees for sending money abroad has declined over the past five years, the fees paid for exchange rate margin have been rising. “This highlights the lack of transparency in remittance fee structures, putting consumers at risk hidden fees As they inadvertently pay a marked exchange rate higher than advertised for the remittance service,” a press release issued by Wise stated.
Total Foreign Transaction Fee paid on remittances from India (Rs.)
In the last five years, money lost in the exchange rate margin on inward remittances has increased from Rs 42 billion to Rs 79 billion. Meanwhile, payment of transaction costs has increased 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 the Gulf countries, where most 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 ranks first at 24%, followed by the United States (18%), United Kingdom (15%), Qatar (8%), Canada (6%), Oman (5%), United Arab Emirates (5%), Kuwait (5%), Australia (4%),” the Wise release said.
The report also revealed that before the pandemic, Indian travelers spent ₹42 billion in foreign exchange charges in 2019 alone, of which Rs 24 billion is hidden in the exchange rate mark-up.
Total Foreign Transaction Fee paid on remittances to India (Rs.)
