The issue of immigration has been a keenly contested one in British media and politics for years, and whether you believe immigration steals jobs out from under British citizens or acts as a booster shot for our flagging economy, the fact of the matter is that we increasingly live in a multicultural and multinational society.
Many foreign arrivals to the UK will be looking to earn enough money to send home to their families still struggling in their homeland. As Channel 4's much lauded/criticised Benefits Street demonstrated, many groups of newly arrived immigrants (in this case Romanians) fail to find the work they so desperately seek, creating the image of the destitute immigrant that some media outlets use as a means of promoting their anti-immigration views.
However, for those who do manage to find work, sending remittances to their families will be a top priority come payday, and the quickest and easiest means of doing so will be through one of the popular money transfer operators (MTOs) like Western Union and MoneyGram.
Don't for a moment think that the remittances being sent out of the UK are small potatoes, though. Recent statistics released by the World Bank suggest somewhere in the region of $23 billion is sent out of the UK as remittances annually, with India's economy receiving a staggering $70 billion in remittances from the global Indian population in 2012. It's not surprising then that the average cost of UK remittances currently stands at 8.40 per cent, the highest since 2009. Although statistics on remittances are hard to estimate due to so much money moving through informal channels, it's clear enough that remittances are big business for banks and MTOs.
It's therefore important for customers to be aware that various MTOs charge vastly different rates for the exact same service. For instance, moving £120 from the UK to India may cost a mere £2.90 through one provider and £10 through another. Customers should be aware that charges are hugely inconsistent, and those who are sending a portion of their wages to their families every month could stand to lose out on hundreds of pounds over the course of a year.
The Office of National Statistics recently released statistics and an infographic regarding the changing face of UK immigration over the past 50 years. This report makes it clear that South Asia and Eastern Europe are the main sources of the UK's immigrant population, and thus the bulk of the UK's remittance market. Therefore we've analysed the costs of transferring £120 from the UK to India, Poland, Pakistan, Bangladesh, Bulgaria and Romania over the course of a year through two of the UK's biggest MTOs: Western Union and MoneyGram.
Data collected January 2014 from westernunion.co.uk & moneygram.com
Research conducted by WhichOffshore, January 2014
MoneyGram's charges consistently float just under the £10 mark for transfers to both Eastern Europe and South Asia, whilst Western Union will charge only £2.90 for a transfer to India but a huge £19.60 to Bulgaria.
Reaching out to a Western Union representative regarding the discrepancy in pricing structure, we were told that, because of the large volume of online transactions to India, Pakistan and Bangladesh, they offer discount rates on their transactions. In other words, Western Union sees the value of remittances to South Asian countries as a more lucrative endeavour than Eastern European business.
By choosing the wrong MTO, immigrants looking to send monthly remittances could lose out on large sums over the course of a year, with Bulgarians potentially £115.32 out of pocket.
Mumbai-born Farhad Divecha has been in the UK for ten years, and still regularly sends money back to his parents in India:
"There's definitely a huge market for Indian remittances in the UK, particularly those that have only been in the UK for a short time. I transfer money from my UK account to my Indian account to finance my business, and so I don't pay these kind of charges. But this isn't really an option for most Indians in the UK. Opening up a non-residential account in India is like pulling teeth, and if you need to transfer money regularly and quickly it's simply not a realistic option".
Michael Brinksman, Content Editor at offshore financial resource WhichOffshore suggests that:
"These fees can hit people hard, particularly those in the low-income bracket. Consumers need to be aware that money transfer charges aren't simply based on exchange rates and standardised fees. Money transfer operators have business models aimed at making the most out of the global remittance market. Don't simply use an MTO based on the fact that it is a recognised name.
"Although fees can be drastically lower for transfers that take several days rather than several minutes, the recipients of these remittances are often in a state where waiting a few days is not a viable option. There's a wealth of information available online, be sure to shop around or else you could end up hundreds of pounds out of pocket."