Dubai: UAE residents have now started paying the additional 15 per cent – or Dh2.5 – each on their remittances when transacting through physical outlets operated by currency exchange houses. The hike in remittance fee is the first such in 5 years and was initially planned in early April.
But leading exchange houses only started actively implementing the hike in late April or from this month, thus allowing more time for their customers to get used to the higher charges. The move seems to be paying off, according to industry sources, with remittances done through physical outlets continuing to record sizeable numbers.
The 15 per cent hike does not apply to remittances done through banking or digital platforms operated by the likes of e& money, du and fintechs.
So far this month, “We're seeing significant increases in remittance activity across our omni-channel network – outlets and via the app,” said Adeeb Ahamed, Managing Director of LuLu Financial Holdings. “Both the actual transaction volumes and values are spiking compared to the same period last year.”
Even after the 15 per cent fee hike, the UAE’s ‘remittance rates are well within the 5 per cent target set by the UN's Sustainable Development Goals for 2030.”
A rush of promotions
Towards the end of this month, currency exchange houses, banks and fintechs will be launching heavy promotions, whether it is to retain customers despite the fee hike, or winning them over with the promise of 'cheaper' options to send their funds home.
Obviously, limited time 'zero fee' offers will be a significant part of these offers. The thinking is that clients will opt to send more than their usual remittance size to make use of these. And gradually, a full-scale transition to digital payment ways will happen.
What are cost-conscious customers doing?
The fee hike was done after extensive discussions, with the UAE industry grouping FERG (Foreign Exchange and Remittance Group) taking the lead. The reasoning was that operational costs have been increasing for currency exchange houses, and that their service fees had to reflect that.
At the same time, any hike would have an impact on cost-conscious clients. This is where limiting the increase only to those transactions done from physical outlets comes in handy.
So, how are customers showing up at the physical outlets reacting to the hike?
“It's mostly the Indian diaspora sending more than Dh1,000 who seems to be questioning the fee raise,” said Antony Jos, Executive Director at Joyalukkas Exchange. “But the majority still go on to complete the transactions. People are willing to pay the amount.
“Now, what we have to see if they will return next month – that’s when new trends on remittances will start to emerge.
“Our app downloads also hasn't showed a huge change so far this month. People are mostly just coming to know about the change in fees, and any change in behavior might take a bit longer.”
As of now, nothing much has changed. It's not a huge increase so even at the branches there hasn't been much chatter.”
