How do you plan to send your next remittance? Starting May, UAE exchange houses will hike remittance fees by 15% on transactions done from their branches. But not on digital transfers... Image Credit: Shutterstock

Dubai: The UAE’s remittances sector and how residents send money overseas are up for some major changes in the coming weeks as the 15 per cent fee hike is introduced by currency exchange houses.

It’s the first time that remittance fees have been hiked in 5 years.

The increased fee – which effectively works out to Dh2.5 per transaction – will only apply to those funds sent by residents at the physical branches operated by these currency firms. All members of the Foreign Exchange and Remittance Group (FERG) in the UAE have agreed to the fee increase for transactions done by customers at their outlets.

“All FERG members are set to implement the same, tentatively set for first week of May,” said Antony Jos, Executive Director at Joyalukkas Exchange. “UAE exchange houses were asked to provide 60 days’ notice to customers before increasing the fees. This was in accordance with the consumer protection regulation.”

The current fee structure is Dh22 per transaction (and VAT) on funds sent to India and the Philippines. It shoots up to Dh50 and VAT when it’s to the UK. (On remittances to Pakistan, it's Dh22, but the customer does not get charged as the State Bank of Pakistan reimburses exchange houses in full.)

Remittances offered online or via mobile apps of exchange houses will most likely remain unchanged to maintain competitiveness

- Antony Jos of Joyalukkas Exchange

Still lower than global remittance fee average

The major reason for the hike was to bring UAE rates closer to the global average for sending remittances.

“It is important to note that despite the 15 per cent fee adjustment, the average cost of remittance transactions from the UAE remain below 3.5 per cent,” said Adeeb Ahamed, Managing Director at Lulu Financial Holdings.

“This figure stands significantly lower than the global average of 6.2 per cent, underscoring our commitment to maintaining competitive pricing.”

The hike will not apply on transactions done through digital means – and that potentially sets up one of the biggest boosts to sending remittances via online platforms or apps.

It is important to note that despite the fee adjustment, the average cost of remittance transactions from the UAE will remain below the 3.5 per cent global average

- Adeeb Ahamed of Lulu Financial Holdings

Currently, transactions done by customers visiting exchange houses’ locations still represent the biggest percentage of remittance volumes from UAE. These locations are also heavily favoured by blue-collar expats, and who will be particularly sensitive to an increase in their monthly remittance costs. “The Dh2.5 per transaction will weigh heavily on these customers, and they too could look to cheaper options to send money back home,” said an official with a remittance house.

This is why the sector could be poised for one of the biggest transitions to digital means of sending money, according to industry sources, since the Covid period. At that time, online, app and bank transactions became the norm, and to this day, a significant percentage of UAE residents’ transactions are now done this way.

Fintech platforms too

These days, fintech platforms such as e& money (part of the UAE tech-telecom group e&) is aggressively courting market share in remittances. So is the Astra Tech owned super-app Botim (which was primarily a voice calling platform before it topped that up by getting into new user categories).

Hyper aggressive promotions

Already, these fintechs run aggressive promotions on their remittance charges, with extended zero-cost fees and the like. The market expects more of the same from May onwards, as all stakeholders in the remittance space angle for higher market share.

For instance, e& money this month is running an offer where all transfers are free between April 1-April 15, which of course also includes the crucial high remittance volume Eid break. And for the second-half of April, it's 50 per cent off on the fees.

"There's a natural progression when it comes to convincing more UAE residents to send money digitally," said an FX analyst. "Then comes events like Covid which speeds up the process, and now you have the 15 per cent hike at physical currency outlets. The speed of digital transition on remittances will just get faster." 

More to follow...