by Josh Brown, Financial Writer
Ignorance is not bliss when it comes to remittance costs
All money transfers are processed for a fee – whether they are hidden or not. To be clear, the remittance costs have certainly dropped considerably since fintech companies such as OrbitRemit appeared on the scene.
However, they have not yet managed to discover a way to facilitate remittance payments for free. Banks charge about 5% – 10% in transfer and FX costs and independent remittance companies usually perform them for about 1% of the total transfer value. Remittance costs have come down but now fees are often charged to the customer in non-apparent ways. Although it is not important to understand how your transfer is processed, it is important to understand the actual ‘conversion rate’ which is the amount received divided by the amount sent and its comparison to the interbank rate.
If money transfer business offers free payments, they are usually incorporating their ‘fee’ in other ways’
For example, they charge a wider foreign exchange spread which is the difference between the buy and sell price. In other words, the conversion rate is weaker. The problem for customers when going with a fee-free offer is that the remittance costs increase in tandem with send amount. A flat fee is often more economical for larger transfers as the higher the transfer amount, the lower is the proportion of the charged fee to the send amount.
Some fees are charged in other obscured ways
For example, they are charged on the destination side or they are charged as ‘bank’ fees that show up on a bank statement. Commonly, a fee is charged after an order is created with the remittance company sneakily justifying it by claiming the markets have moved. Orders should always be fixed – a beneficiary should always receive the expected exchange value and it doesn’t matter what happens in the market in the time it takes to process the transaction.
OrbitRemit plays no games when it comes to facilitating money for its customer and offers transparent pricing
Our costs are a combination of flat fee and exchange rate. For most transfer, we charge a $4 flat fee (the full list of fees per channel can be found here) and the FX rate is generally between 0.5 and 1% from the interbank rate. We’re upfront about our fees but we are also confident in saying that we offer some of the cheapest remittance rates around.