Stock Money exchange dirhams currency
Which is cheaper? To send money via banks, online, mobile apps or exchange houses? Picture of Al Ansari money exchange, Dubai, used for illustrative purposes. Image Credit: Photo Virendra Saklani/Gulf News

Dubai: For many of us, sending money abroad or receiving payments from a client or a family member in another country is relatively common. Whether you’re an expat, a freelancer with foreign clients, an international student or own property abroad, you are probably familiar with the remittance process.

However, as the need for more customer friendly international money transfer has grown, so have the number of financial start-ups offering banking alternatives, apart from the traditional means of transferring money like banks or money exchange houses.

Banks are comparatively costlier

Banks remain the most expensive type of service provider in 2022 when it comes to remitting money back home, a World Bank gauge indicates. However, to know how much this really costs you warrants a comparison between what banks charge and what money exchanges charge.

The World Bank’s Remittance Prices Worldwide (RPW), which monitors remittance prices across all geographic regions of the world, indicated an average cost of 10.92 per cent of the amount you transfer, when it comes to remitting money from banks.

(RPW covers 48 remittance sending countries and 105 receiving countries, and tracks the cost of sending remittances across banks, traditional and fintech service providers, mobile operators, and post offices.)

Stock Money Exchange
Customers at Lulu Exchange in Sharjah. Image Credit: Ahmed Ramzan/Gulf News

But how high are the charges?

But how high is 10.9 per cent and how much of your hard-earned income is shelled out in transaction costs to the bank? Also how do these costs fare when compared against other exchange service platforms, like doing it either online or through your mobile phone. Let’s find out.

When mobiles are used to fund the transaction and as the means to disburse, it was found that the medium has been the least costly instrument consistently, the RPW index further revealed.

For remittances, the cost of transfers at money transfer operators is recorded at 5.22 per cent, while mobile operators are the cheapest remittance service provider at 3.45 per cent, both falling versus year-ago quarters, the report noted, but flagged that mobile operators only account for a very small share (less than 1 per cent) of the sample size. 

Regardless of where you have an account, it is a pattern observed worldwide wherein banks tend to offer poorer exchange rates

- Anil Pillai, a UAE-based forex analyst

Bank account transfers get pricier

With bank account transfers, when used as the instrument to fund the transaction, have experienced a 36 percentage point increase in average cost between second quarter of 2021 and the same quarter a year later.

One good news is that the World Bank report also showed how during the second quarter of 2022, the global average cost worldwide for sending $500 (Dh1,836) was 4.04 per cent.

The research also noted that the average cost of sending $500 has remained below the 5.00 per cent total average cost since 2014 and has never exhibited a value above 6 per cent (the costliest period was in 2011).

Particularly in the past decade the cost of remitting has been declining worldwide since 2011, representing a decline of 1.28 percentage points since 2011, when the figure was recorded at 5.32 percent.

Which country offers the least cost?

While costs for sending remittances to Indonesia, India and Mexico were recorded below the global average, over the last quarter the Middle East region experienced the largest decrease in the world from 6.66 per cent to 6.33 per cent, the report further revealed.

190628 remitances
Picture used for illustrative purposes.

Why banks aren’t always the way to go

While your trusted local bank may offer uncomplicated – even helpful – service with ordinary monthly transactions, you’ll probably find that things get a bit intricate the moment you want to send money abroad.

"Regardless of where you have an account, it is a pattern observed worldwide wherein banks tend to offer poorer exchange rates and are also often levy hidden charges," opined Anil Pillai, a UAE-based forex analyst.

"If you’re exchanging money through your bank, you’re probably not getting the best deal on exchange rates as you would through specific money transfer services."

Matter experts largely agree that banks specialise in availing several other products and services, and not as focused on exchange rates, due to which the rate is widely observed to be inconsistent with remittance house currency rates.

"Overseas transfers via bank can be fast and expedient – but it can also be an expensive option. But some UAE banks are rolling out products to compete with exchange houses,"

Most institutions follow the Interbank rate, and then base their own rates around it. The interbank rate is the constantly fluctuating price at which banks trade currencies with each other.

Thanks to relationships with correspondent partners in other countries, several banks in the UAE do not levy upfront service fees

- Matt Simeon, UAE-based forex analyst

How much do UAE banks charge?

"Thanks to relationships with correspondent partners in other countries, several banks in the UAE do not levy upfront service fees for transfers in the destination country’s local currency," evaluated Matt Simeon, another UAE-based forex analyst.

"However, customers will very rarely find bank rates working in their favor. In other words, you are paying a premium for convenience. Banks’ service fees for international money transfers in the UAE can range from zero to Dh100, not including VAT. International bank transfers can take up to five working days."

With banks you pay a flat fee instead of a percent of a total: Most banks charge customers a small percentage of the international money transfer as a fee for the services.

"Be aware, however, that personal visits to a bank may incur higher service charges when compared to international payments in the UAE made via online or phone banking," cautioned Simeon.

A teller at a bank in Dubai
Most UAE banks charge up to a 4 per cent margin on the interbank rate when they send your money overseas.

"So look for money transfers that only charge flat fees on your transaction. Not only will this help you budget your expenses, but it will also help save money."

Before sending money abroad, be sure to ask your bank what their transfer charge would be for your transaction and also, and more importantly, what the recipient bank’s receiving fee is expected to be.

Their current exchange rate is – they usually set their own, which will often be quite a bit more than the forex market rate. Once you have this information, you can establish how much it will essentially cost you.

Here’s an example
For example, in the UAE, exchange houses on average charges at the most a Dh20 fee for a transfer. If you transfer Dh3,000 per month for a year, you will only pay Dh240 in fees.

If you chose a bank that charges at the most Dh50 per transaction, you would spend Dh600 in fees over the course of a year. With online brokerages, the fees depend on exchange rate.

Checklist when sending money abroad

If you’re about to send money abroad for the first time, it may have sounded simple in theory, in reality there are quite a number of factors to keep in mind to do this successfully.

Here’s a list of some of the most important questions you would need answered, before embarking on the process of remitting money back home or wherever you would want to.

• Are you transferring to another currency?

• What is the current exchange rate between these currencies?

• Do you want to send a large or small sum of money?

• How speedily do you want the person on the other side to receive the money?

• Is it a once-off payment or a recurring one?

• What fees will you have to pay?

• What will the final costs be after all the fees and exchange rate?

• How safe will your money be?


Before sending your money using the first, most convenient option, you may want to spend some time researching which will be the most beneficial to both you and your recipient but also what the do's and don'ts are. Begin researching by using money transfer tools or calculators that are freely available online.

A common comprehensive platform is the World Bank’s global cost calculator. You can use this tool by simply selecting the country you’ll be sending money to, enter the amount you’d like to send and hit the ‘compare’ button.

In most of these tools, you’ll also be able to access an overview of the current exchange rate, as well as a complete list of financial service providers able to assist you and the costs connected to each. You can then opt to view the list by whichever of the following is most important to you.

You could either choose to go for the ‘cheapest’ avenue first, or the means to the fastest medium – which assures a comparatively lower transfer time for your transaction. If not, you could always opt for one according to the platform’s ratings.