World Bank: Fees for home transfers too high

ACountless people live scattered all over the world who work far away from home because there are hardly any opportunities there. They regularly transfer part of the money they earn home, thereby supporting families or friends who often live in poverty. These so-called remittances or “remittances” are valuable and often vital aid totaling billions. However, the fees incurred reduce the money that arrives abroad.

According to estimates by the World Bank, these remittances to low- and middle-income countries are likely to increase by 4.2 percent this year compared to 2021 to 630 billion dollars (605 billion euros). The return flow to Ukraine was to increase by 20 percent as a result of the war. The country is the largest recipient in Europe and Central Asia.

From twelve G-20 countries alone (including the USA and Germany), around 206.6 billion euros are likely to be transferred to other countries in 2022, for which an estimated 11.7 billion euros in fees were incurred, according to the technology company Wise and Sandra Sequeira from the London School of Economics based on World Bank data. This corresponds to a fee of 5.66 percent on average. Even if the costs have fallen compared to the previous year (2021: 6.2 percent), they are still well above the United Nations (UN) target of less than 3 percent by 2030. If these twelve countries alone were to meet the target today, the transfer recipients could receive around 5.2 billion euros more, says the payment provider Wise. Since 2015, the costs for international transfers in these countries have fallen by an average of 1 percent. If these do not fall more quickly in the future, nine of these countries, including Germany, would miss the 3 percent target by 2030.

22.4 billion euros from Germany

For this year, Wise expects remittances from Germany totaling 22.4 billion euros. That would correspond to an increase of one third compared to 2021 (16.9 billion euros). The costs of these transfers are likely to fall from an average of 6.53 percent to 5.83 percent. This puts Germany almost 1.5 percentage points above Italy (4.37 percent). The fees in the UK are also lower (5.62 percent). The costs in France, on the other hand, exceeded those in Germany with an average of 6.41 percent.

In total, people from Germany will pay around 1.4 billion euros in fees for remittances in 2022, an increase of 27 percent compared to 2021. Although the fees have fallen, the flow of money has increased at the same time. According to Wise, if Germany were to comply with the UN requirement now, the recipients would receive an additional 730.7 million euros. From 2012 to 2021, a total of 15.3 billion euros in fees were incurred for these transfers from Germany, even if the costs fell from around 11 to 6.53 percent – among other things due to offers from digital payment providers. According to the World Bank, credit institutions remain the most expensive providers with fees averaging almost 11 percent recently.

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