The average cost for sending remittances globally is around 7.6%, should the UK's international payment market be regulated?
Calls have been made for the UK's £15bn remittance market to have its charges capped.
It is alleged that money transfer firms are charging unjustifiably high spreads and leaving consumers at a massive disadvantage.
Xpress Money, a global remittance firm, have called for government regulation of the industry after alleging that spreads of up to 7.6% are being charged on market exchange rates.
(This is labelled by Xpress Money as the 'cost' of tranferring money).
By way of contrast, the company say, "our global average cost for sending remittances is 2.09%."
In light of the discrepency Xpress Money's Chief Operating Officer of, Sudhesh Giriyan, is calling for regulation of the charges made on international remittances, a consumer market worth an estimated £400 billion globally.
Giriyan has not suggested in what form this regulation should come as.
It can be argued that introducing legislation will drastically reduce competition in the market as a small industry has been built up around specialists currency providers who actively undercut banks and larger players like Western Union by offering tight exchange rates.
No doubt Xpress Money is a key player in this industry judging by their competitive charges.
The competitive advantage of offering better exchange rates than the bigger players would evaporate overnight.
It is for this reason that we believe the onus falls on competitors to actively seek competitive providers.
Nevertheless, the argument against the big players is compelling, particularly when noting the eye-watering cost of transferring money to sub-Saharan Africa:
“What we are seeing is a huge variation in fees and customer rates between territories that exploits and disadvantages clientele. Our global average cost for sending remittances is 2.09%. We see no reason why any money transfer business should be in a position to charge more than this. The average cost for sending remittances globally is around 7.6%. The figure is inflated by costs charged in sub-Saharan Africa which, in some cases, amount to as much as 20%” says Giriyan.
In 2009 the G8 set a target of reducing average charges to five percent.
"Six years on, we are woefully short of that target. Candidly, we see intensive lobbying in this sector, creating effective monopolies in some countries that exploit those in need,” argues Giriyan.
World Bank estimates suggest that Migrants’ remittances to developing countries are estimated to have reached $436 billion in 2014, a 4.4 percent increase over the 2013 level.
In 2015, however, the growth of remittance flows to developing countries is expected to moderate sharply to 0.9 percent to $440 billion, led by a 12.7 percent decline in ECA and slowdown in East Asia and the Pacific, Middle-East and North Africa, and Sub-Saharan Africa.