- India is the largest remittance market in the world
- The forex margin charged may be tiered according to the size of your money transfer
- Indian remitters worldwide are typically well educated
The best tips to save on your next money transfer to India
India is the largest remittance market in the world with around USD 70 Billion sent annually offering an important and stable source of income for millions of families and of foreign exchange to developing countries such as India.
India is currently the most competitive destination corridor, attracting much more competition and better pricing than any other destination with a wide variety of remittance providers offering various combinations of foreign exchange margins and fees to clients.
It is this hidden and often non-transparent combination of forex margins and transfer fees that can make it difficult for you average man on the street to identify and understand the real and actual cost when sending money to India.
It is important to understand the impact of these two cost factors on the actual cost of your money transfer. What looks like a good price may not actually be that competitive once you take into account any hidden costs or commissions. In many cases, forex providers hide the cost of a money transfer within the foreign exchange margin quoted to clients. What looks like a free money transfer to India may have a hidden 5% cost built into the INR exchange rate and many clients will most likely not understand the true cost of their transfer.
We will help you negotiate your way through the complex pricing strategies used by money transfer companies and banks for clients sending money home to India.
What is foreign exchange margin?
Foreign exchange margin, or forex margin, is the difference between the current interbank exchange rate and the rate quoted to you by your forex broker.
The forex margin charged may be tiered according to the size of your money transfer. For example, if you are sending GBP 100 to India the rate that you receive will not be as competitive as a client sending GBP 10,000 to India. The more money you are sending the more competitive the forex margin is that you will be quoted.
Many forex brokers will charge their clients no money transfer fees but then a very high forex margin or alternatively may charge you a high transfer fee but then a very competitive forex margin. The pricing models adopted by remittance companies can be varied and complex. At first glance they may appear to be the same but they are not.
There can be huge pricing differences between providers so ensure that you understand costs and shop around for the best combination of transfer fees and forex margins.
Be careful when choosing a forex provider and ensure that you take into account all costs and are aware of any hidden or non-disclosed costs.
It is also important to note that if a money transfer company send money to India via the Swift network then that may similarly attract receiving fees charged by the Indian bank to receive a payment from overseas. This once again can be a hidden cost that is not disclosed to remitters.
Indian client profiles: Well educated, price sensitive and online
Indian remitters worldwide are typically well educated customers who clearly understand the money transfer market and associated pricing and fees.
Clients do not send or pay out cash into India. The majority of remittances into India are paid out into bank accounts indicating a higher level of sophistication amongst Indian clients worldwide.
So who is the cheapest remittance provider to India?
Exchange4free is ranked by the World Bank as the cheapest money transfer service provider from South Africa to India based on data collected in July 2016.
See World Bank data at https://remittanceprices.worldbank.org/en/corridor/South%20Africa/India
Exchange4free charges no transfer fees, commissions or receiving fees to clients sending money to India.
In addition to an unbeatable no cost policy Exchange4free charges forex margins from as low as 0.4% versus many competitors offering money transfers to India at all-in costs in excess of 5%.A simple analysis of this pricing model shows the following:
Forex Margin = 0.4%
Transfer Fees = 0
Commissions = 0
Indian Bank Receiving Fees = 0
Total Cost = 0.4%
Further to the above great cost benefits, Exchange4free also offers clients in over 40 countries the ability to send money into India using our website, mobile device or our brand new chat app offering a level of speed and convenience never seen before in the remittance industry.
The Indian money transfer market has evolved over the past few years into an online service focusing on pricing, efficiency and customer service. Times are changing and it is expected that most markets around the world will follow the Indian model over time moving away from cash which results in high costs and slower transfer times.
The Indian model is the blueprint for other markets and Central Banks worldwide to replicate. With total global remittances in 2014 hitting close to USD 600 Billion governments and Central Banks, in association with the IMF, are trying to drive down the price of money transfers particularly into exotic and emerging market economies who rely on these remittance inflows for capital inflows. It is the responsibility of Central Banks to ensure that funds can flow smoothly and freely into their markets and at the lowest cost possible.
As a result of the large global Indian population the Indian government has created a regulatory framework that is conducive to promoting low cost and high volume money transfers into India. This has contributed to a highly competitive environment where money transfer providers such as Exchange4free offer all-inclusive remittances into India at less than 0.5% whereas in some destination countries costs are still in excess of 10%.
The model adopted in India should be replicated by others worldwide in order to generate large volumes of remittance inflows and to facilitate this money transfer process for diaspora and non-residents living abroad,