UAE remittances tried and tested
Sending money back home is a ritual followed by most expatriates every month.
With dozens of exchange houses, banks and online brokerages offering their services, it can be confusing for residents to figure out the cheapest and quickest way to remit earnings to their home country. To help our readers, we conducted a casual experiment last month to find out the best options available.
And we found Emirates NBD’s Direct Remit was the best method for a money transfer to India – at a rate of 17.66 rupees to the dirham.
Four staffmembers from The National sent Dh1,000 to India and a further four sent the same amount to the UK, two of the biggest destination of funds from the UAE. The transactions were all carried out on October 8 between 12pm and 12.45pm.
There was no criteria when it came to choosing the exchange method; the testers either picking remitters they had used before or randomly based on proximity to their home or office.
When remitting money, customers are typically offered a rate of exchange and charged a fee. The results of our survey showed that, in general, the better the exchange rate, the higher the fee.
The four reporters remitting money to India – the biggest destination for UAE remittances, accounting for about 40 per cent of all funds – used the transfer service Western Union, the online brokerage remit2India.com, Emirates NBD and the exchange house Al Rostamani Exchange.
While Emirates NBD’s Direct Remit service offered the best rate, it was also speedy, arriving at its destination in one hour. Western Union was the fastest option, with the money available within six seconds. Emirates NBD’s Direct Remit service can transfer money within an hour and as quickly as 60 seconds to any bank in India using new technology.
“Based on The National’s results, Emirates NBD is the most efficient way when transferring money in the case where a Direct Remit process exists,” says Josiane Assaad from Souqalmal.com, a price comparison website. “Otherwise, usually exchange dealers are more cost efficient than banks.”
Emirates NBD has ramped up its game in forex in the past two years, focusing on being competitive with rates in the Indian rupee, Filipino peso and Pakistani rupee.
However, to use Emirates NBD’s service, you must have an account at the bank, something that aids the speedy delivery as the bank does not need to do its due diligence as the remitter already banks with it.
“It’s not a hugely profitable product for us,” says Suvo Sarkar, the head of retail banking at Emirates NBD. “It’s about making the customer stay with us, given that 90 per cent of the population are expats and send money home once a month or more than once a month.”
Meanwhile, for those transferring Dh1,000 from the UAE to the UK for the The National’s experiment, there was a greater variance in the exchange rate on the UK pound, with the associated fees not as competitive as the costs of sending money back to India. The remitters used Al Rostamani Exchange, the online brokerage Global Currency Exchange Network (GCEN), the bank Abu Dhabi Commercial Bank (ADCB) and the exchange house Al Ansari Exchange.
The best rate offered came from ADCB at 5.682 to the pound. However, a Dh100 transfer fee ultimately made sending Dh1,000 uncompetitive compared to GCEN, which offered a rate of 5.8 and a fee of Dh1. It meant £172.36 (Dh976) was received by the GCEN customer compared to the £158.4 received via ADCB.
“If you are going to a mall and sending a small amount home, the rate you are getting will look quite good but people forget there’s a fee,” says Charlie Day, an account manager at GCEN, adding that the company does not charge a telegraphic transfer fee and covers the receiving fee at the other end.
However, study the results of the UAE to UK remittance experiment more closely and at a certain cut-off point, it becomes better value for money to send through ADCB as the fee stays the same no matter the amount sent. According to The National’s calculation, that cut-off point would be about Dh5,000.
“In general terms, ” says Ms Assaad. “It is worth noting that many of the big banks in UAE offer free direct remittance to selected countries, which makes the process much more efficient than through other channels.”
However, that doesn’t mean that exchange houses won’t offer you as favourable rates. You just need to negotiate with the larger the amount sent, the better value you receive.
On its website, GCEN asks clients who want to send more than the equivalent of £10,000 to phone rather than doing it through its websites. Banks are also open to negotiation.
“I know that I will have to be more competitive to win business with larger amounts,” says Mr Day at GCEN. “So you will get a better rate on a higher volume because I know our competitors are doing better and I have to get more competitive on that.”
GCEN, however, was criticised by our tester for offering a better rate estimate on its home page to the one offered once the tester had logged into his account.
Mr Day says the discrepancy in the two quotes was because the website rate is the so-called mid market rate – an average of the day’s rate. Once you log in and execute the transaction, he adds, you get a live rate.
Interestingly, two of the eight transactions did not complete. The remit2India.com transfer was rejected as the company wanted an “internet banking trace number”, something the sender’s bank was not familiar with. And the Al Ansari Exchange transfer to the UK was rejected as the company says the IBAN number did not correspond with the receiver’ bank account.
“Our systems are built with the objective of protecting our customers’ interests and to make sure that the funds reach the right beneficiaries. If there is any mismatch in the transaction information, the system would immediately block it. And this is exactly what happened in this case,” says Badr Kamal, the head of administration at Al Ansari Exchange.
As a proportion of the total global remittances market, the UAE is a fairly big one.
In the UAE, about $18bn is sent home by workers each year, according to the World Bank. More than half of the remittances in the UAE go to Asian countries such as India, Pakistan and the Philippines. Beyond Asia, the UK, Australia and Canada are among top destinations.
UAE Exchange, the country’s biggest exchange house, says it is forging ahead with a plan to offer its services outside its branches through digital channels, such as the internet and mobile phones.
“Digital transformation is going to be the theme for us,” says Promoth Manghat, the exchange house’s chief executive.
It’s not only UAE Exchange customers who are set to see an improvement in remittance services.
David Horton, Dubai-based head of Innovation at Synechron, a technology company whose clients include banks and financial services, says UAE residents are likely to see vast improvements in the speed and cost of sending money back home. This is thanks to so-called blockchain technology – also known as peer-to-peer distributed ledger – the same technology that crypto currencies such as Bitcoin use.
Mr Horton says to transfer money himself, he uses Transferwise, a UK-based company that uses similar peer-to-peer technology such as blockchain to cut middle men out.
Blockchain allows those using the technology to send funds to each other almost instantly without having to rely on middle men such as correspondent banks.
“Of all the areas of business banks are covering now, cross-currency transfers is going to see the most improvement over the next year or two,” Mr Horton says. “When you send money today, you are typically paying 6 per cent to 9 per cent when you include fees and commissions,” he says.
“If there are enough banks working on the blockchain network, and have reciprocal agreements, potentially what it means is near instant fund transfers. And once they’ve added their fees, it’s likely to be in the 1 per cent to 2 per cent range.”
Questions on remitting money to your home country? Find the answers at www.thenational.ae/blogs/your-money
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Updated: November 6, 2015 04:00 AM