Page 56 - Banking Finance September 2025

FEATURES

Rs. 1,700 cr: Hidden cost of sending

money abroad

F amilies sending money abroad to support their money through multiple intermediaries, Wise maintains
children's education paid an estimated Rs 1,700 crore
local pools of funds at both ends of the payment corridor.
($200 million) in bank fees and currency markups in
2024, a report released by Redseer Strategy Consultants When a sender transfers money, the company uses domestic
systems to disburse an equivalent amount to the recipient
and Wise, a global cross-border payments company, after receiving confirmation that funds have arrived on the
showed. sending side. This method allows Wise to offer faster
transfers, at the mid-market exchange rate without markup.
According to the study, more than 95% of India's annual
student remittances, estimated at Rs 85,000-93,500 crore Conventional bank transfers involve multiple charges:
($10-11 billion), flow through traditional banks, which sending banks add a 2-6% exchange rate markup;
typically apply a 3-3.5% exchange rate markup and take intermediary banks deduct $10-30 each; SWIFT levies
between two and five days to complete transactions. network fees; and receiving banks may charge up to $16.
These layers, along with hidden compliance costs, push total
Families remitting Rs 30 lakh annually can lose up to Rs remittance costs to 5-7%, which often go unnoticed.
75,000 in hidden costs. The estimates of the costs tie in with
what World Bank has had to say on the cost of cross border "The stories and the sheer scale of money lost to opaque
remittances. The costs are slightly lower than what migrant pricing should be a wake-up call," said Taneia Bhardwaj,
workers in rich countries pay to send money home. south Asia expansion lead at Wise.
According to World Bank, the global average cost of sending
$200 was 6.4% of the amount sent, a slight increase from Since launching in India in 2021, Wise has seen education-
6.2% a year earlier. related payments account for 75% of its volume from the
country.
Digital remittances are significantly cheaper, averaging 5%
in fees, compared with 7% for non-digital methods. This According to the study, India has emerged as the largest
global cost remains well above the UN Sustainable source of international students in the US, overtaking China
Development Goal target of 3%, which aims to make in 2024. Indians make up 30-35% of international student
remittances more affordable for migrants and their families. populations in the US, the UK, Canada, Australia and
Germany, which is up from 11% a decade ago. With overseas
Wise, which sponsored the study and competes with banks education spending by Indian households expected to double
on international money transfers, has an interest in drawing by 2030, the cost of remitting funds will become increasingly
attention to these inefficiencies. Unlike banks that route material. (Source: Times of India)

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