Indians spent a total of Rs 263 billion in foreign currency fees in 2020

According to a new analysis, Indian consumers spent more than Rs 263 billion on foreign exchange costs in 2020, with over Rs 97 billion concealed as exchange rate markups on currency conversions, payments, and card purchases. Transaction fees accounted for the remaining Rs 166 billion.

According to a survey done by Wise, a worldwide technology business, the annual amount lost by Indians in fees and exchange rate mark-ups climbed from Rs 187 billion to Rs 263 billion between 2016 and 2020. These data were derived from an independent study conducted by Capital Economics in August 2021 with the goal of estimating the size of foreign exchange transaction costs in India.

“Consumers are entangled in a labyrinth of hidden exchange rate markups, hefty fees, delays, and tiny print whenever the rupee is converted into a dollar, Euro, or any other international currency, or vice versa. Today’s research reveals a serious lack of openness in foreign exchange transactions – consumers have been duped into paying excessive fees for overseas transactions for far too long when suppliers disguise fees in exchange rate markups “Wise India’s Country Manager, Rashmi Satpute, stated.

Remittance pricing arrangements that are ambiguous

Due to a lack of transparency in fee structures, most people today are unable to comprehend the actual expenses of transferring money abroad. The upfront transaction charge and the exchange rate are the two costs connected with foreign currency transactions. Traditional banks and providers typically place a concealed markup on the exchange rate instead of using the fair, mid-market rate, so the upfront charge may not represent the overall cost of the transaction. The difference in rates results in a hidden fee, which increases the cost of transferring money internationally unnecessarily.

The Reserve Bank of India used World Bank data in a 2018 study on inbound remittances, which revealed that the average cost of transferring $500 to India fell from 4.9 percent in 2013 to 3.3 percent in 2018. However, the price varies depending on the region and manner of transportation. Outward remittances have higher transfer costs than inward remittances.

Saudi Arabia ranked first with 24 percent of total fees paid on inward remittances to India in 2020, followed by the United States (18 percent), the United Kingdom (15 percent), Qatar (8 percent), Canada (6 percent), Oman (5 percent), the United Arab Emirates (5 percent), Kuwait (5 percent), and Australia (5 percent) (4 percent ).

According to the survey, Indian travellers spent $42 billion in foreign currency fees prior to the outbreak in 2019, with $24 billion of that disguised in exchange rate markups.

Wise was founded in 2011 by Taavet Hinrikus and Kristo Käärmann and was originally known as TransferWise. Its ticker is WISE, and it is traded on the London Stock Exchange. According to the company‘s press statement, Wise is used by 11 million consumers and businesses and handles over £5 billion in cross-border transactions every month, saving clients over £1 billion each year.