Indians Paid Rs97 Billion as Hidden Foreign Exchange Rate Markups on Rs263 Billion Foreign Exchange Fees in 2020

IANS 27 October 2021

Economy & Nation

Indians paid over Rs263 billion on foreign exchange fees in 2020, of which roughly Rs97 billion were hidden as exchange rate markups on currency conversions, payments, and card purchases and the remaining Rs166 billion were spent on transaction fees, a new report showed on Wednesday.

The research, carried out by global technology company Wise, along with independent economic research consultancy Capital Economics, also revealed that between 2016 and 2020, the annual amount Indians lost in fees and exchange rate markups increased from Rs187 billion to Rs263 billion.

While the overall amount Indians have spent on transaction fees for sending money abroad has decreased over the past five years, the fees paid to exchange rate margins are growing.

This highlights a lack of transparency in remittance fee structures, putting consumers at risk of hidden fees as they unknowingly pay more than advertised for the remittance service in the form of a marked up exchange rate, the report noted.

"The research exposes a severe lack of transparency in foreign exchange transactions as for far too long, consumers have been fleeced into paying unnecessary costs for foreign transactions when providers hide fees in exchange rate markups," said Rashmi Satpute, Country Manager, Wise India.

"While technology and internet has eased some of the issues related to the convenience and speed of foreign funds transfers, the age-old practice of hiding fees in the exchange rate results in people spending too much on hidden foreign currency fees - money which should rightfully stay in their pockets," Satpute added.

Consumers sending money into India from abroad are not spared from hidden fees.

Over the past five years, money lost to exchange rate margins on inward remittances has grown from Rs42 billion to Rs79 billion.

Meanwhile, fees paid to transaction costs have grown from Rs102 billion in 2016 to Rs140 billion in 2020.

A significant portion of these fees paid on remittances to India come from people in Gulf countries where most people are employed in blue-collar jobs to support their families back home in India.

"Of the share of total fees paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by the US (18%), the UK (15%), Qatar (8 per cent), Canada (6%), Oman (5%), the UAE (5%), Kuwait (5%) and Australia (4%)," the report showed.

The study also revealed that pre-pandemic, Indian travellers spent Rs42 billion in foreign exchange fees in 2019 alone, of which Rs24 billion is hidden in exchange rate markups.

Over 11 million people and businesses use Wise, which processes over 5 billion pounds in cross-border transactions every month, saving customers over 1 billion pounds a year.

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

Comments

User

Kamal Garg

5 years ago

The article is meaning less unless it informs the total remittances made by Indians in a year and then, the mark-ups and transaction fee paid on it. In the absence of total remittances made, simply informing the total amount at Rs. 263 bn is meaningless.

dummytg

5 years ago

Forex market broker commission is not regulated by RBI. A Normal user doesn't even know what is the actual price of conversion and different banks at the same time have a difference of upto 5% in price. Please do an article to educate on Mid-Market Rate, and xe.com and brokerage involved.

Harish C Kohli

Replied to dummytg comment 5 years ago

Very true, and I say from my own experience. If one selects an agency and go back to it, the rates increase. With some agencies it is possible to bargain. An article by Moneylife will be well appreciated.