Filipinos can be considered the world champions of international money transfer. The Philippines currently rank number 3 in the countries that receive the most remittance each year, according to the World Bank.
Why Filipinos make international money transfers?
According to the World Bank, 5.4 million of Filipinos are living outside of their home countries. There is even an acronym dedicated to them: OFW, Overseas Filipinos Workers. In 2015, they sent $28 billion in international money transfer. Over the last 3 years, remittances have increased by 20%, representing today 13,5% of the country’s GDP. You can easily imagine the terrible consequences for the local economy if the remittances would suddenly.
Most Filipinos’ international money transfer mainly come from the USA (representing one-third of the total remittances with 3.5 million filipinos living in the country) then Saudi Arabia, UAE, Canada (750 million) and Malaysia. In total, 34% of the adult population is receiving remittances from relatives living abroad.
How do they make international money transfer?
12% of Filipinos use a financial institutions send money home. However using such institutions is by far the most expensive way to make an international money transfer. Indeed for such transfers you’ll pay on average 10% of the amount in fees.
58% of OFW use a money transfer operators for their international money transfer.
What is exactly a money transfer operator? There are two types of them:
- The “traditional” ones such as Western Union or Moneygram. Even though they are probably the most famous one, they are very expensive. Expect to pay also 10% fees with such operators.
- The new actors operating 100% online such as Transferwise or WorldRemit. Currently, they are the cheapest option you could go for as they cost on average 2% of the amount transferred.
One key stake about remittances in the Philippines is to be able to reduce their costs. They currently cost an average of 8%, which means that each year $2.3 billion are literally disappearing (actually going to the banks). I let you imagine what could be done if this amount could be saved each year on all international money transfer.