UAE remittance fees set to increase by 15% as Central Bank approves revision

Money exchange businesses in the UAE will gradually increase charges in certain remittance corridors for the first time in five years after the UAE Central Bank approved an optional fee adjustment, Mohammad Al Ansari, chairman of Al Ansari, has said.

“Exchange houses will not increase fees immediately, it will take at least another two months and will be gradual,” said Mr Al Ansari, who is also chairman of the Foreign Exchange and Remittance Group.

“It will be implemented after studying each corridor and could happen in the second quarter of this year,” he said.

“This has been in discussion with the Central Bank for some time. We tried to keep the rate as it is for the past few years and were absorbing the increase in operation costs despite many new regulations and requirements from foreign regulators.”

On Monday, the group of remittance businesses said exchange houses could opt for a minimum fee increase of 15 per cent, which would typically equate to Dh2.50.

This decision recognises the evolving regulatory landscape and related cost increases since the previous update, the group said.

Remittances to poor and middle-income countries increased an estimated 3.8 per cent to $669 billion last year, according to the World Bank’s migration and development report released in December.

There is a risk of a decline in real income for migrants this year in the face of global inflation and low growth prospects, the report added.

India was the top remittance recipient country last year, receiving funds worth $125 billion, followed by Mexico at $67 billion, China at $50 billion, the Philippines at $40 billion and Egypt at $24 billion.

The US remains the largest source of remittances.

The decision to increase remittance fees will depend on individual exchange companies and their operational costs, Mr Al Ansari said.

The fee increase is expected to be applicable for remittance services through physical branches, while remittances offered through mobile apps of exchange houses will most likely remain unchanged or even reduced to maintain competitiveness.

“Some new players, like non-traditional exchange companies, may even provide services online for free or a very minimum rate for marketing purpose,” Mr Al Ansari said.

The decision will not affect customers transferring large amounts of money. Instead, it may be more significant for people sending lower amounts, he added. “As long as there are options, I don’t think this move will negatively affect customers.”

The Central Bank approval follows an evaluation of operating expenses associated with maintaining service standards and complying with regulatory requirements, according to the group. “There has been a big jump in expenses since the pandemic,” Mr Al Ansari said. “This relates to system upgrades, regulatory requirements, rent and manpower costs, Emiratisation and the introduction of corporate tax at 9 per cent.”

Lulu Exchange, Al Fardan Exchange and Delma Exchange declined to comment on the remittance fee rise.

Despite the increase, it is expected that the average remittance cost of sending $200 will remain at less than 3.5 per cent in the UAE, the group said.

This is significantly below the global average of 6.2 per cent in 2023, according to the World Bank’s Remittance Prices Worldwide database.

Money exchanges likely to raise fee in a gradual manner and it ‘will take at least another two months,’ Al Ansari says