The remittance conundrum

Some providers apply different mark-ups for different send-receiving methods. While loyalty to a provider has been very strong among over additional expenses.

Other important factors to consider when remitting money through a cash-agent are the receiving currency and the amount. Sending money less often but larg amounts can save you additional costs, as margins for cash-agents tend to be lower for larger transactions. The receiving currency can be important because some providers are charging less for receiving exchange-agent. For instance, you earn Dirhams and subsequently convert it into US Dollars with an agent making a small spread on the said transaction. The cash-agent, Western Union, then makes a transaction fee if US Dollars are sent to the Philippines and the receiving party accepts US Dollar. When the US Dollars are converted back to Philippine Pesos, the local exchange-agent earns a small fee as well.

Irrespective of your transaction mode, timing your transaction is important but is often overemphasized. Unless large amounts are sent or value (such as the British pound after the Brexit vote), the impact of timing is very small. The best overall strategy for sending money is different for each of us based on preferences on cost, speed, convenience and customer service. If cash-agents are not your only option because you or your recipients have bank accounts, sending money online should be your preferred choice. On average, cash-to-cash transfers are 3-5 times more expensive than bank-to-bank transfers and are often less convenient as well. Online transactions can save you from patiently standing in line for hours outside Lucky Plaza. Once an account is set up, the data is saved popular tool for online remittances from and to the Philippines is Xoom, which was acquired in 2015 for $890 million by PayPal. Xoom scores exceptionally well on speed and convenience. With its easy user interface and fast service, it has become a popular choice for remittances. Similar services such as Transfast, Remitly and Worldremit have gained popularity as well in recent years.

One platform that started servicing the Philippines early last year has gained huge popularity - ployee of Skype, TaavetHinrikus,Transferwise made it its mission to improve transparency of remittances. In contrast to the majority of the above-mentioned services, Transferwise competes very aggressively on prices and only charges a to-bank transfers received in pesos but is set to open different channels. The company’s success can be largely attributed to its consistency. Fee’s remained stable over the years and customers do not need to be afraid of hidden costs.

In a nutshell, saving money on remittances is not easy but worth the additional time spent on comparing. If transaction fees on remittances could be lower by a few percentage points, roughly the rate for some online-channels and prepaid card transaction in the Philippines, the gains could put nearly $1.5 billion more in recipients’ pockets. This is equal to roughly 0.5 percent of GDP and double the level of development assistance the Philippines received from the World Bank in 2015.

- pected to grow 4 percent over 2016-2017 and lowering transaction costs by expanding the use of less expensive payment methods is a lowhanging fruit for local policy makers to boost welfare, increase consumption, and improve MoritzGastlisthemanagingdirectorofMoneyMax.ph,afinancialcomparisonwebsite aimingtohelpFilipinossavemoneythrough