Exchange rate margin weigh on remittances

New Delhi: Indians paid over Rs263 billion on foreign exchange fees in 2020, of which roughly Rs97 billion were hidden as exchange rate markups on currency conversions, payments, and card purchases and the remaining Rs 166 billion were spent on transaction fees, says a report. The research carried out by global technology company Wise, along with independent economic research consultancy Capital Economics, also revealed that between 2016 and 2020, the annual amount Indians lost in fees and exchange rate markups increased from Rs187 billion to Rs263 billion. While the overall amount Indians have spent on transaction fees for sending money abroad has decreased over the past five years, the fees paid to exchange rate margins are growing.

This highlights a lack of transparency in remittance fee structures, putting consumers at risk of hidden fees as they unknowingly pay more than advertised for the remittance service in the form of a marked-up exchange rate, the report noted. "The research exposes a severe lack of transparency in foreign exchange transactions for too long, consumers have been fleeced into paying unnecessary costs for foreign transactions when providers hide fees in exchange rate markups," said Rashmi Satpute, Country Manager, Wise India.

"While technology and internet has eased some of the issues related to the convenience and speed of foreign funds transfers, the age-old practice of hiding fees in the exchange rate results in people spending too much on hidden foreign currency fees - money which should rightfully stay in their pockets," Satpute added.Consumers sending money into India from abroad are not spared from hidden fees.Over the past five years, money lost to exchange rate margins on inward remittances has grown from Rs 42 billion to Rs 79 billion.Meanwhile, fees paid to transaction costs have grown from Rs 102 billion in 2016 to Rs 140 billion in 2020.