The End of a Great Ripoff! Fund Transfers Made Cheaper

Financial intermediaries charge up to 12% to transfer funds internationally. Most of these transactions are from migrants wanting to send money home. At last, there is a solution that will dramatically reduce these costs and put an end to the free ride of financial institutions on the backs of migrant workers.  Original Polish version of article in Forbes PolandBritish_Pounds_Wide

Polish migrants working abroad sent over $7.6 billion home during 2011 (World Bank), providing an important source of income to their families for whom this often represents a critical lifeline for survival. Unfortunately, financial intermediaries take advantage of the opacity of this market and the lack of sophistication of their customers to impose exorbitant fees to send these funds internationally. According to the World Bank, the costs of a typical transfer of £120 from the United Kingdom to Poland ranged from 7.6% to 10.4% through Western Union and Money Gram (during the last Quarter of 2014). Even worse, commercial banks charge the highest fees on money transfers, on average 11.75%, often hidden within exchange rates to make their services seem cheaper than they are. This leads most migrants to wrongly believe that bank transfers are the cheapest way to send money. With around $ 1.3 billion transferred from the UK to Poland in 2011, the amount of money withheld by such agents is enormous.

Globally, the World Bank estimates that migrant remittances reached $582 billion in 2014, with average fees of 7.9%. In 2008 already, alarmed by the burden of these fees, the G8 had announced its “5X5” objective to cut the cost of transfers by half – from 10% at the time to 5% in 2014. Not only are we significantly off target, but fees to send funds to Sub-Saharan Africa remain above 11%. With three-quarters of these moneys being sent to developing countries, it is estimated that missing the “5X5” target cost these countries an estimated $16 billion in 2013, more if some of the cheaper transfer options that are already available were used.

Today, a number of innovative money transfer operators like TransferWise, Azimo, CurrencyFair, WorldRemit, transferGo offer solutions to send money across the globe for as little as 0.5%. But lack of awareness and the inability to compare the various transfer options remains a problem. Seeing a business opportunity in helping migrant workers find the best money transfer option money, a group of young Swiss entrepreneurs developed, a web-based platform that helps compare the fees of fund transfer providers by destination. “The “United Kingdom – Poland” was one of their first “corridors” to take advantage of the large volume of transfers from the 521,000 Poles working there” said Tawipay co-founder, Laurent Oberholzer. A new “German-Polish” corridor, representing around $1.5 billion, was launched just last week.

While the website is free for users, the service is financed by micro-commissions from the operators. The success of the startup is therefore linked to its capacity to generate large volumes of transactions. Given the potential for enormous savings offered by TawiPay platform, let’s hope that today’s fund transfer quasi-monopolies will soon be a story of the past and that we will be able to expect better transparency and lower fees from the sector.

The TawiPay Story

In 1998, after a trip to Cameroon, Francois and Pascal Briod, two young students in Lausanne (Switzerland), created an association to support a village in this African country. In the first year they sent 180 Swiss francs and were shocked by the 10%+ fees charged by Western Union to transfer the funds. Realizing that globally such fund transfers represent over 500 billions of dollars annually, the Briod brothers teamed up with Laurent Oberholzer to develop the platform that helps migrant workers lower the costs of sending money abroad.