A World Bank report puts the global amount of remittances in 2014 at $582 billion and estimates that migrants paid an average of 7.9% in fees on these money transfers.
The cost of remittances are an important development issue which has caught the attention of the international community. Speaking at the Sibos banking conference in Boston last week, Bill Gates chided the assembled bankers for wanting to extract higher fees for money transfers to the world's poor even as innovations in technology removed the friction and brought costs down.
In 2009, the G8 announced the goal of reducing the global average cost of remittances from 10% to 5% by 2014, the '5x5 Objective'. The World Bank's report pegs this average cost at 7.9% in 2014, down from 8.9% in 2013.
Meanwhile, fees on remittances towards Sub-Saharan Africa - the most expensive region to send money to - still exceed 11%. The fees applied by service providers and intermediaries prevent large sums of money from reaching their destination. It is estimated that, if the 5x5 Objective were to be reached, an additional $16 billion would reach developing countries.
The public sector's failure to reach the 5x5 objective has spawned a myriad of initiatives to provide remittance services at a fair price. However, the market's complexity and lack of transparency has also made it difficult for migrants to find the service most suited to their needs.
Swiss money transfer comparison Website TawiPay estimate that migrants could save an average of two-thirds on their remittance fees - collectively $28 billion - by switching from the mainstream money transfer operators to the cheapest services.