Five unexpected insights into the international money transfer industry

The international money transfer market is an often-overlooked industry that affects millions of Americans and their families around the world. It lacks transparency, can often be confusing, and combines a unique mix of traditional and clunky payment methods and processes with a new wave of high-tech competitive players. wanted to uncover these issues by diving deep inside the international money transfer industry, with a comprehensive study of 35 providers and 13 finalists. The results were showcased in the website’s Money Transfer Awards 2017.

The study provided several unexpected insights. Here are the top five findings that shed some light on the industry.

1. An estimated US$2.59bn is spent on fees consumers may not know about

When sending an international money transfer, many senders assume that the given exchange rate is the same as the market rate – what you’d see were you to Google-search an exchange rate from one currency to another. As a result, senders often only examine the transfer fee, not realising that the exchange rates can vary between providers, with some adding a big slice of their profit pie on top.

By comparing the exchange rates of these providers with the mid-market exchange rates, we found the average difference to be 1.84%. This was based on online, non-bank money transfers from the US. Had the comparison included banks and cash transfers, this percentage would be even greater.

We forecast that US$141bn is estimated to have been sent from the U.S. in 2016 in remittances, by analysing data from the World Bank. By calculating 1.84% of this figure, we estimated US$2.59bn was spent in potentially hidden fees.

Our research revealed that of the 35 providers analysed, TransferWise and Circle were the only ones with exchange rates accurately reflecting the market rate. These fees could explain the findings from our survey of 2,000 respondents, which revealed that 80% of those sending money transfers from the US felt ripped off.

2. Industry veterans are behind in online country and territory coverage

The study found that traditional, money transfer veterans were behind some of the newer, tech-savvy players when it came to online coverage. As an online company itself, was interested in looking at the transfers that could be sent entirely digitally – meaning no cash.

A further finding was that Western Union is the heavyweight in the room, and, despite being able to send cash to all 196 countries, they came in fourth place for online transfer availability, sitting at 59 countries and territories.

Digital native, PayPal, was only available in 38 countries and territories, while SmallWorld had the most expansive coverage, with 83 countries and territories – but that’s still less than half of the world’s countries and territories. TransferWise and WorldRemit tied second, with 74 countries and territories available.

Sixty-two per cent of providers offered cash pickup in addition to online transfers. This observation raises questions as to how important is cash – especially to recipients.

3. No such thing as a “sanctuary provider”

“Sanctuary cities”, a term commonly employed in the US by the alternative-right, suddenly became part of the American vocabulary as a city that limits its cooperation with federal government agencies when it comes to immigrant deportation.

The official documents and identification required varied dramatically while testing money transfer sites. We were curious to find out whether there were providers who were more lenient when it came to verifying legal status, with the results revealing that less ID verification in the sign-up stage actually caused security problems later in the transfer process.

Four of the 13 providers did not require inputting a social security number (SSN) or uploading additional documents, but three of these four resulted in live transfer failures or complications due to unknown security reasons. Pangea was the only provider that made successful transfers without a SSN or uploaded documents, but they also were one of the only providers that rejected false recipient credit card information and transfers sent from unlicensed states within the online application process. They ensured only legitimate information was entered in real-time.

When transfers failed due to unknown security reasons, representatives of the provider directed customers to physical locations – if available – as the liability falls on the customer in cash transfers.

4. Money transfer industry performs best in user experience (UX) despite being a banking product

Despite being a banking product, which are usually notorious for bad user experience, the user experience UX scores were relatively high across the money transfer order (MTO) providers analysed. As they specialise in one specific area of banking, this likely leads to a better user experience as they have one area of focus and a need to optimise it for their users to meet margins in such a competitive market.

5. UX dark patterns could explain why 80% of money transfer senders feel ripped off

The money transfer industry scored highest on average in user experience, but lowest in trustworthiness.

Participants from the commissioned user testing study were asked to rate credibility based on appearance. The discrepancy between the average score for ‘best user experience’ (70.6%), compared against the average score for ‘most trustworthy’ (53.0%), demonstrates the gap between perception and reality.

The gap between perception and reality is often referred to as a “dark pattern”. The term, coined by user experience designer Harry Brignull, describes interfaces that intentionally use human psychology against our own interests. That’s a recipe that could certainly lead people to feeling “ripped off”.


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