India-based Companies Challenging Wise in Their Outbound Market
In the bustling world of international money transfers, India is witnessing a significant shift as digital remittance services are making their mark. According to recent data, international travel was the top remittance purpose, accounting for $17 billion, followed by maintenance of close relatives ($4.6 billion), gifts ($3.6 billion), and studies abroad ($3.5 billion).
This transformation is evident with Indian banks launching their own mobile apps and digital remittance offerings. One such platform, Wise, has recently acquired a license to serve Indian customers for overseas money transfers.
However, the pricing for remittance services varies significantly. Digital remittances, such as Money2India, often promote zero transfer fees for amounts above $1,000. While this may seem attractive, these platforms recover costs through exchange rate spreads. For instance, a transfer of $5,000 could result in substantial costs, around $41, due to these spreads.
Traditional banks, on the other hand, charge an exchange rate markup of about 3–3.5% plus some service fees and take 2-5 days for transactions. Families sending ₹30 lakh annually abroad can lose around ₹75,000 in hidden costs due to these fees and markups.
The Indian Liberalised Remittance Scheme (LRS) allows individuals to remit up to $250,000 USD per financial year for specific purposes. Banks generally allow high per-transaction limits, while online transfer services and cash pickup providers have lower limits.
UPI, a digital payment system in India, has been adopted by several countries abroad, and Indian digital wallets like Paytm, Google Pay, and BHIM are the single most popular payment instrument in India.
As the Indian remittance market continues to grow and digitalise, companies like Wise and Revolut are showing increasing interest. In fact, Revolut acquired Indian forex business Arvog in 2022.
It's important to note that remittances from India can be subject to high taxation, with a 20% tax on remittances over INR 700,000 ($8,340), excluding education and medical remittances.
The Indian government is promoting UPI as a payment method to support its diaspora worldwide, and several well-known remittance players, such as MoneyGram, Remitly, and Ria, are still receive-only in India.
In the 12 months leading up to March 2024, India's outbound remittances under the Liberalised Remittance Scheme reached $31.7 billion. Major remittance players are maintaining growth in Europe, the US, and Asia, but India continues to see big banks lead on outbound remittances.
UPI processed 117.6 billion transactions in 2023, highlighting the growing demand for digital payments in India. The Indian remittance market is an exciting space to watch as it continues to evolve and adapt to the needs of its users.
| Method | Fees (Approx.) | Exchange Rate Markup | Transfer Limit | Transfer Time | |--------------------------|---------------------------------|-----------------------|-------------------------------|----------------------------| | Traditional Banks | 3–3.5% exchange rate markup + bank fees | ~3–3.5% | High, often $50,000+ per tx | 2–5 days | | Digital Remittance (e.g. Money2India) | ~0-4 USD fee + exchange rate spread | Varies, often significant | $1,000+ to tiered lower limits | 1-2 days typical | | Global Average (World Bank) | ~6.4% on average (sending $200) | Included in fee total | Varies | Varies | | RBI LRS Limit | N/A | N/A | $250,000 per financial year | N/A |
In conclusion, digital methods reduce explicit fees but involve exchange rate markups that can be costly on large sums. Traditional banks remain expensive but reliable. The choice depends on transfer size, urgency, and tolerance for hidden costs.
The growing interest of companies like Wise and Revolut in the Indian remittance market is a testament to the significant digital shift in finance business. This shift is marked by the launch of digital remittance services by Indian banks and the increasing popularity of digital payment systems like UPI.
The usage of technology in remittance services is evident; platforms such as Wise and Money2India leverage technology to offer digital remittance services, while UPI, a digital payment system in India, has been adopted by several countries. Moreover, the Indian remittance market's evolution and adaptation to user needs can be observed through the increasing number of digital wallets, such as Paytm, Google Pay, and BHIM, in India.
