The Cost of Sending Remittances: Why 28 Countries Still Pay More Than 3%

Sending money home is a lifeline for millions of families worldwide. Yet in 28 countries, the cost of remittances remains stubbornly above 3%, reducing the funds reaching loved ones and impacting local economies. In this article, we explore why these fees persist, global trends in remittance pricing, and strategies for businesses and consumers to reduce costs while maximizing impact.

Why Remittances Matter Globally

• Remittances are monetary transfers sent by workers living abroad to their families at home. They are more than just a financial transaction—they are a crucial tool for economic stability, poverty alleviation, and social welfare. According to the World Bank, remittances directly contribute to Sustainable Development Goal (SDG) 17.3, which encourages global partnerships to support development financing.
• Some countries rely heavily on remittances for their national income. The top five countries where remittances contribute over 25% of GDP are:
  • Tajikistan: 38.4%
  • Samoa: 28.2%
  • Nicaragua: 26.2%
  • Honduras: 26.1%
  • Nepal: 25.4%
• In these economies, remittances are critical for household spending, healthcare, education, and small business investment. For millions, remittance income is the primary source of survival and economic security.

Global Trends in Remittance Costs

• The UN has set a target to reduce average remittance transaction costs to less than 3% globally (SDG 10.c). Achieving this target would allow families to save an estimated US$20 billion annually and potentially increase the funds sent home.
• Between 2016 and 2023, the global remittance landscape saw positive progress:
  • Over 90% of countries (76 economies) reported a decrease in remittance transaction costs.
  • Among these, 48 economies met the UN SDG target of less than 3%.
  • Lesotho recorded the largest reduction, dropping from 16% in 2016 to just 2% in 2023.
  • Despite this improvement, significant disparities remain. Many countries, especially in Sub-Saharan Africa, continue to experience high remittance fees, limiting the impact of financial transfers on local development and household welfare.

Why Remittance Costs Remain High in 28 Countries

• Even with global efforts to reduce costs, 28 countries still have remittance transaction fees exceeding 3%. The persistence of high fees can be attributed to several factors:
  • Regulatory Challenges: Complex and inconsistent regulatory frameworks often increase operational costs of remittance providers.
  • Limited Financial Infrastructure: Underdeveloped banking and mobile money systems rely on informal channels, which are less efficient and more expensive.
  • Market Concentration: Some countries have limited providers, allowing high fees to persist.
  • Transaction Complexity: Multiple intermediaries add fees at each stage; the more complex the corridor, the higher the costs.
• High-cost countries include: Sierra Leone, Uganda, Angola, Botswana, and Zambia—where fees exceed 7% as of 2023.

The Economic and Social Impact of High Remittance Fees

• Families Lose Vital Income: Households may receive significantly less than what was sent, affecting essentials such as food, healthcare, and education.
• Reduced Capacity for Investment: Lower remittance inflows can limit small business, housing, or educational investments, slowing local economic growth.
• Global Economic Implications: Reducing fees to the UN target of 3% could save families around US$20 billion annually, which could be reinvested in local economies.

How Technology Can Help Reduce Remittance Costs

• Money Transfer Software Solutions: Advanced platforms enable fast, secure, and transparent remittances, cutting out many traditional costs.
  • Real-time transactions: Faster processing reduces intermediary fees.
  • Multi-currency support: Enables seamless transfers across multiple countries.
  • Enhanced security: Protects users from fraud and ensures compliance with regulations.
  • Lower operational costs: Automation reduces overheads and manual errors.
• Mobile Wallets and Digital Channels: Reduce the need for physical branches, decreasing operational expenses and enabling cheaper transfers.
• Open Banking and API Integration: Integrates directly with financial institutions, reducing transaction layers and fees.
• Tip for businesses: Solutions like RemitSo provide comprehensive software to optimize operations, reduce fees, and ensure compliance.

Policy and Regulatory Solutions to Lower Costs

• Governments and international organizations can reduce fees by:
  • Promoting competition: Encouraging more providers drives fees down.
  • Regulatory simplification: Streamlined KYC/AML procedures reduce compliance costs.
  • Support for digital finance: Promotes mobile payments and reduces reliance on costly intermediaries.
  • Global standards: Collaboration with FATF and World Bank ensures transparency and efficiency.

Tips for Consumers to Reduce Remittance Costs

• Compare providers: Use online tools to compare fees and exchange rates.
• Use regulated fintech platforms: Digital channels are cheaper than traditional banks.
• Opt for mobile wallets: Lower fees and faster processing.
• Avoid multiple intermediaries: Direct transfers minimize added costs.
• Monitor exchange rates: Timing transfers when rates are favorable reduces indirect costs.

Future Outlook for Remittance Costs

• Digital transformation: Increasing adoption of mobile and online remittance services.
• Open banking and APIs: Streamlined transfers with lower fees.
• Blockchain and crypto: Potential for ultra-low-cost cross-border payments.
• Financial inclusion: Expanded access for unbanked populations, especially in Sub-Saharan Africa.
• With these developments, remittance fees could approach or drop below the UN target of 3%, allowing more funds to reach families in need.

Conclusion

• High remittance costs remain a critical challenge, particularly in 28 countries where fees exceed 3%, affecting families, economies, and development goals.
• Technological innovation, digital finance, and supportive policies are key to reducing costs. Advanced software solutions, digital wallets, and open banking enhance efficiency, security, and affordability.
• For businesses, solutions like RemitSo provide robust, compliant, and scalable software platforms to optimize operations, reduce costs, and expand global reach—benefiting both businesses and the families they serve.