A World Bank report puts the global amount of remittances in 2014 at $582 billion and estimates that migrants paid an average of 7.9% in fees on these money transfers. A huge cut that could be reduced by $28 billion if migrants used cheaper services.
The World Bank expects the global amount of remittances – the money transfers made by migrants back to their home country – to reach $582 billion in 2014. In its latest report on migration and remittances, the development bank estimates that three-quarters of these funds will have been received by developing countries. These $435 billion, which are up by 5% over 2013, represent a lifeline for the survival and development of these economies, paying for food, education, healthcare and investments in small businesses. These flows amount to three times that of the Official Development Assistance (ODA) and are a much more stable source of external capital than Foreign Direct Investment (FDI).
The cost of remittances are an important development issue which has caught the attention of the international community. In 2009, the G8 announced the goal of reducing the global average cost of remittances from 10% to 5% by 2014, the “5×5 Objective”. The World Bank’s report pegs this average cost at 7.9% in 2014, down from 8.9% in 2013. Meanwhile, fees on remittances towards Sub-Saharan Africa – the most expensive region to send money to – still exceed 11%. The fees applied by service providers and intermediaries prevent large sums of money from reaching their destination. It is estimated that, if the 5×5 Objective were to be reached, an additional $16 billion would reach developing countries.
The public sector’s failure to materialize the 5×5 Objective has spawned a myriad of initiatives to provide remittance services at a fair price. Innovative money transfer operators now offer ways to send money around the globe for as little as 0.5% of the transfer amount. Overshadowed by the historical incumbents of the money transfer market, these companies have not yet managed to reach mass adoption of their services. The market’s complexity and lack of transparency has also made it difficult for migrants to find the service most suited for their needs.
TawiPay is a comparison website for money transfer services helping migrants find the cheapest way to send money abroad. It is fully independent, totally free of charge and was founded by three Swiss entrepreneurs with the explicit goal of helping migrants save on their remittances. The service is very easy to use and the process consists of just a few clicks. After inputting the amount and the receiving country, users can see all established money transfer services, their respective fees and money reception channels on a single page. An emphasis has been made to fully disclose and display all hidden fees, so that users can always make an informed decision when choosing the most appropriate service. Using the World Bank’s methodology, we estimate that migrants could save an average of two-thirds on their remittance fees – collectively $28 billion – by switching from the mainstream money transfer operators to the cheapest services.