How much extra is your online platform charging you for your remittances?

In Dubai, most residents now prefer to remit money online, but rates — particularly currency mark-ups — can vary significantly across different service providers. With the growing number of options, how do you know when it’s time to switch platforms?

The digital shift in money remittance has accelerated, with companies adapting to years of growth in just a few months. While technology has improved the convenience of sending money abroad, experts argue that fees remain high, especially with the prevailing exchange rate mark-ups.

The World Bank recently flagged that global remittance fees average 6.6%, which is more than double the 3% target set by the United Nations Sustainable Development Goals. These high fees are particularly evident in traditional banking models, where transaction costs remain steep.

The transition to digital channels has been a game-changer, lowering costs and increasing transparency. With the shift accelerated by the pandemic, digital remittance platforms have become more accessible, allowing for greater convenience.

Even banks have revamped their online systems to make remittance transfers as simple as sending money domestically. Central banks and financial technology (FinTech) firms are exploring new technologies to enhance the remittance space.

One key difference between sending and receiving money abroad is regulation. Outward remittances are tightly controlled by central banks, while inward remittances are less regulated.

Most banks don’t charge a fee for receiving funds, but they do apply a forex mark-up—the difference between the prevailing exchange rate and the rate used by the bank. Newer remittance companies, however, often charge a fraction of what banks do.

For example, if the exchange rate for $1 is Dh3.65, a bank may offer a rate of Dh3.59, resulting in a lower amount for the recipient. While the mark-up may seem small on smaller transfers, the difference becomes significant on larger amounts.

Banks typically charge a flat fee of about Dh60 for remittances, regardless of the amount. The overall costs — including forex mark-up — can range from 2-4% of the total transfer. These charges apply mainly to popular currencies, but rates can be higher for less common currencies, especially when multiple banks are involved.

Non-bank platforms, although they may use the same banking infrastructure, often offer lower forex mark-ups but may have higher service fees. When choosing a platform, it’s important to consider both the service fee and the forex mark-up to determine the most cost-effective option for your transfer.