Page 57 - Banking Finance December 2023

FEATURES

The actual price of doing business

internationally

I ndia is a big and quickly expanding service exporter. losses occur. The discrepancy between the market rate and
The commerce ministry's data indicates that the
the rate you get when converting money is known as the
forex mark-up. The forex rate you get whenever you
expected value of services exported in 2022-2023 was
$323 billion, an increase from $254 billion in 2021-
2022. This covers the earnings of freelancers who work for exchange money is never exactly the same as the going rate
in the market. Financial firms keep this discrepancy in order
agencies, consultants, gig workers, exporters, and other to profit from foreign exchange deals. You can find the
companies with clients abroad. If you work as a freelancer, current market rate by searching "USD INR" on the internet.
exporter, or get money from abroad on a regular basis, you Thus, even though you would get paid $10,000, you would
are aware of how painful it is to pay banks and payment lose about $250 in exchange fees.
systems outrageous and unclear fees. Processing fees for Conversion and platform costs: Platform fees and conversion
foreign currency payments might be as much as 2% to 10%
fees are charged by a number of banks and fintech
of the total transaction amount when you get paid for your companies. These could take the form of a percentage of
services. These costs reduce your revenue because the the transaction amount or fixed fees each transaction.
break-up is typically concealed and incurred by the recipient.
Banks frequently don't disclose this cost up front.
It is crucial to comprehend the typical concealed expenses Additionally, rather of being deducted from the account at
as a result. the time the payment is processed, these charges are

SWIFT/wire fees: These are often set or slab-wise fees that deducted later. In any scenario, you should be aware of
are subtracted upon payment transmission by the foreign these costs because they immediately reduce your income.
bank of your client. These fees can range from $20 to $75, For example, processing foreign payments into India is
depending on the nation, bank, and quantity. These fees are subject to a 4% fee charged by several payment companies.
your client's to pay or to pass along to you. For example, if
Service fees: The majority of consumers are unaware of this
the client chooses to transfer $50 in quick charges to you
additional charge. Fintech platforms and banks charge for
on a $10,000 payment, you will only get $9,950 in India. a variety of services, many of which are not made clear up
Fees charged by intermediary banks: When sending money front. There isn't much information available, even after the
internationally, funds usually go via a number of banks, and fact, as to why a specific service charge was made. For
each intermediary (also known as a correspondent bank) is example, a number of banks charge "Inward Remittance
allowed to take a fee. For example, intermediate banks may Certificate charges" for the issuance of FIRCs. These can
withhold $200 or more in correspondent bank charges while occasionally reach as high as Rs. 2,000, although they are
receiving a $10,000 payment. You would only receive $9,750 often between Rs. 200 and Rs. 500 each transaction. On
in India in the example above since, once again, this will be the other hand, UPI has simplified and reduced the cost of
removed even before the money arrives in India. Both quick domestic payments in India.
costs and intermediate bank fees are not uniform and
While waiting, choose service providers who offer clear fees
disclosed up front; the exact amount of fees is only disclosed and exchange rates. You may also use online calculators to
once the money is received. find out how much foreign currency transactions will cost

Forex rate markup: This is typically where the most of your overall, including all fees and penalties. (Refer to Mint)

BANKING FINANCE | DECEMBER | 2023 | 51