Dubai, UAE – As digital remittance services become the preferred method for transferring money abroad, Dubai residents are increasingly scrutinizing the cost-effectiveness of their chosen platforms. Despite the convenience of online transactions, exchange rate mark-ups and hidden fees vary significantly across providers, prompting many to explore cheaper alternatives.
Are Online Remittance Platforms Still Cost-Effective?
The digital shift in money remittance has accelerated, with financial technology (FinTech) firms and banks modernizing their platforms to make international transfers as seamless as domestic ones. However, while digital platforms offer greater accessibility and transparency, experts argue that fees remain high—particularly due to forex mark-ups and transaction costs.
The World Bank recently flagged global remittance fees at an average of 6.6%, more than double the 3% target set by the United Nations Sustainable Development Goals (SDGs). Traditional banking models continue to charge high fees, while newer remittance companies offer competitive rates but may impose service fees that eat into transfer values.
Understanding Hidden Costs: Forex Mark-Ups vs. Service Fees
Most banks do not charge fees for receiving remittances, but they often apply a forex mark-up—the difference between the official exchange rate and the rate they offer to customers.
For example, if the market exchange rate for $1 is AED 3.65, a bank may offer AED 3.59, reducing the final amount received by beneficiaries. While this difference may seem minor for small transactions, it becomes significant on larger transfers.
Comparing Costs Across Platforms
- Banks: Typically charge a flat fee of around AED 60 per transaction, along with a forex mark-up ranging between 2-4% on the total transfer. The costs can be higher for less common currencies, especially when multiple banks are involved in processing the transfer.
- FinTech & Non-Bank Platforms: These often offer lower forex mark-ups but may compensate with higher service fees. The trade-off depends on the provider and currency involved.
Time to Switch Platforms? Key Considerations for Users
As Dubai residents navigate the growing number of remittance options, financial experts suggest regularly comparing exchange rates and fees before transferring money. Some key factors to assess include:
- Forex mark-up vs. market exchange rate
- Service fees charged by banks or remittance platforms
- Processing times and ease of use
- Regulatory compliance and security of transactions
With central banks and FinTech firms actively exploring ways to reduce remittance costs and improve efficiency, users are encouraged to stay informed about new, more affordable options in the market.
