Millions of consumers are offering financial support to friends and family members residing abroad. However, when it comes to getting those (remittances) to the intended recepients, it is a lot more costly than it should be, according to an update from Fintech firm Wise (LSE:WISE).
Because of high costs associated with cross-border payments, the United Nations (in 2015) had set a Sustainable Development Goal which aims to lower overall remittance costs to just 3% or even lower in the coming decade.
Last year, these G20 nations had sent almost $212 billion in the form of remittances, however, almost $11.6 billion was reportedly “lost” to exorbitant fees needed to finalize transfers.
As noted in an update, the key reason remittance prices are still quite high is the lack of adequate transparency for the funds transfer process.
At present, financial service providers may tell clients that their transfers can be performed free-of-cost, include zero-commission or cost merely a low flat fee of $5.
In practice, the largest cost is actually hidden in an exorbitant exchange rate.
This really has a negative impact on remittance senders and recipients.
As mentioned in the update, if more substantial progress was made on effectively lowering the cost of remittances to the intended 3% target set by the UN, then consumers on the receiving side may have actually received $5 billion more in funds.
Fintech firm Wise has shared its second-annual “Remittance Report” which takes a detailed look at the overall progress different nations are making towards not reaching this goal.
As covered last month, Wise, a global Fintech enabling the movement of money and aspiring neobank, says it will boost its presence in the US to meet the increasing demand of its services. Based in London, Wise states that it plans to increase its headcount by 250 in the US during 2023.
Wise reports that during this year, its employees in the US jumped by 75% with offices in Tampa, New York and Austin. Its global workforce now stands at around 4300 worldworld – an increase of 49% versus 2021.
Wise says it intends to double its Austin-based headcount in 2023 to over 200 employees, scaling teams across engineering, product development, operations and sales. Wise will also hire 90 new employees in Tampa, its current U.S. operational hub.
Harsh Sinha, Chief Technology Officer at Wise, commented:
“The significant growth of Wise in the U.S. is a testament to our product offering and the increasing demand by American consumers and businesses for fast, convenient and affordable cross-border payments solutions. We’ve spent the last decade building a sustainable, profitable business model and we look forward to welcoming new team members to help us build the best way for our US-based customers to move money around the world.”