Recently released data from BBVA Research show that remittances are expected to reach nearly $606 billion globally in 2017, a 3.6 percent increase over last year and about a $213 billion increase compared to ten years ago in 2007. The global dollar amount of remittances is expected to rise 3.7 percent next year, indicating that funds being sent worldwide have no signs of slowing down. So, how are people sending money overseas and across borders?
There are multiple ways to forward funds abroad, from prepaid gift cards to mobile money transfer services such as the new app Tuyyo. However, factors such as affordability, timeliness, convenience and security all play a role in how people choose to send funds internationally.
Peer-to-peer (P2P) payment apps allow senders to move funds by mobile phone using a bank account, credit card or debit card. P2P apps are relatively light on fees and typically take the place of middleman entities, such as banks, opening the door for more competitive foreign exchange rates and eliminating the sometimes hefty margin applied to those rates by financial institutions. On the flip side, few P2P services support international transfers.
Financial institutions are beginning to board the P2P train with bank-backed apps that allow for cheaper and faster international transfers than bank or wire transfers.
Mobile money transfer app Tuyyo is a service provided by licensed money transmitter* BBVA Transfer Services, Inc. (BTS), an affiliate of U.S. based bank BBVA Compass and a subsidiary of global bank BBVA Group. The app allows U.S. senders to transfer money by phone quickly with a credit or debit card for a flat fee of $5.49 per transfer to Mexico, the largest remittance corridor from the U.S. where $27 billion was sent in 2016.
Bank Wire Transfers
International bank transfers are a costly option, unless the sender and beneficiary both have accounts at the same bank, in which case, moving money from one account to another is typically cheaper. Conversely, the fees for sending a bank transfer from one bank to another internationally vary by financial institution, and according to personal finance source NerdWallet, many banks also charge a fee for receiving funds. For the national banks surveyed by NerdWallet, the average fee for incoming international transfers is $10 and $44 for outgoing international transfers. International bank transfers usually take longer than P2P bank services like Tuyyo because many variables are involved, including the domestic bank, the foreign bank and a clearinghouse in both countries.
Nonbank Wire Transfers
Nonbank money transfer services tend to have less foreign exchange markups and cheaper fees than bank transfers, but these fees vary widely by service provider. Compared to bank transfers, which typically only use bank accounts, nonbank transfer services give senders the option to pay by bank account, cash, credit card or debit card. In most cases, beneficiaries do not need a bank account to retrieve funds, and transfers and pickups can typically be done online, at retails store and at over hundreds of thousands of worldwide agent locations.
The downside is that a sender needs to research these services in detail, because depending on the service provider, a transfer’s timing and payment method can drastically affect fees and the overall cost. Nonbank wire transfers can be sent to the beneficiary in a few minutes or the same day, but sometimes come with a higher price tag. Also, using a debit or credit card usually can lead to higher fees than using a bank account. While some nonbank wire transfer services charge a flat percentage fee, others charge a percentage fee based on the amount being transferred. Senders who use nonbank wire transfers are protected by the remittances rules of the Consumer Financial Protection Bureau.
Prepaid International Debit Cards
Since bank and wire transfer fees can add some weight, sometimes a hefty amount, to the overall cost of an international money transfer, avoiding electronic transfers altogether may be the cheapest route. When opting to use an international prepaid debit card, the sender may run into an activation fee when loading funds, but that is probably still considered a money-saver when compared to a bank or wire transfer. In addition, the sender will need to pay any postal or shipping fees. The trade-off for an economical win is the amount of time it takes to send a prepaid card, and depending on its destination, it can take weeks for it to reach the receiver. For the recipient, some prepaid cards have daily transactions or withdrawal limits which may not be very suitable in some purchasing situations. Compared to wire transfers and bank-backed P2P apps like Tuyyo, security is a bigger concern when mailing prepaid cards since packages can be tampered with or lost in route.
For more on sending remittances from the U.S. to Mexico via Tuyyo, visit www.tuyyo.love.
Click here for a closer look at BBVA’s research on migration and remittances.
For more information about BBVA Transfer Services, Inc., click here.
*Tuyyo is a service provided by BBVA Transfer Services, Inc., which is a member of the BBVA Group, and an affiliate of BBVA. BBVA Transfer Services, Inc. is licensed as a money transmitter (NMLS ID: #937914) by the New York State Department of Financial Services, licensed by the Georgia Department of Banking and Finance, License Number 42938, licensed as a foreign transmittal agency by the Massachusetts Division of Banks, License/Registration Number FT937914, licensed as a money transferor by the Rhode Island Division of Banking, and licensed in all other states, as required.
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