India is the top destination for remittances or transfers of money from NRIs to family or friends living in India. According to the World Bank, in 2018, NRIs sent a staggering sum of US $79 billion back to India, with the number projected to grow even further to $82 billion in 2019.
Funds are primarily used to provide shelter, food, and education for families. According to a survey by the Reserve Bank of India, in 2017, 59.2% of remittances were used for family maintenance and support, 20.0% for bank deposits, 8.3% for real estate and equity investments, and 12.6% remaining for other purposes.
These important transfers come at a cost. The average cost to send $200 is around 5% for India while averaging 9.0% for other economies. When considering the $79 billion of NRI remittances in 2018, $4 billion was paid in transaction fees, assuming a 5$ fee structure. These inflows are so critical to advancing economies that the UN has a 2030 Sustainable Development Goal target of 3% for the cost of remittances.
Direct transfer to bank accounts is the lowest-cost mode of transfer, due to ease of meeting the Foreign Money Laundering Act and Know Your Customer Requirements. Increasingly though, online money transfer providers are becoming a popular option to remit funds to India. The last few years have seen several new players enter the market, some even funded by established companies. Below we discuss the four best online platforms to transfer money to India.
For NRIs living in the US, UK, Canada, Australia, or Ireland, the well-established Remit2India allows for transfers of from its website or mobile app. Remit2India uses three payment methods, including wire transfers, instant transfers, and online transfers directly into the receiver’s bank account. With instant transfers, money is transferred within 30 minutes while wire and online transfers can take two or more business days.
While there are no transaction fees for transfers from Australia and the UK, US transfers for less than $1,000 are subject to $2.99 in transaction fees. Remit2India also makes money by offering an exchange rate that allows them to make a small margin on the amount transferred.
Users can opt for either a guaranteed or indicative rate, both of which are published on the website. The guaranteed rate is the exact rate at which funds will be converted and received in India while the indicative rate is the effective exchange rate on the day your funds are converted – this means the rate could vary from what was indicated when the transfer is made.
Xoom, a Paypal service available on the web and through a mobile app, allows users to remit funds via Paypal, bank transfer, debit or credit card. Receivers can pick up the funds via cash pickup or bank deposit. Funds typically transfer between minutes to a couple of hours during Indian bank processing hours.
Transaction fees consider the type of transaction, payment method, currency and amount of transaction, as well as the country the funds are being sent. For USD funds being transferred from the US and converted to INR in India, Xoom charges no transaction fees. Xoom generates revenues on the currency conversion spread. For other currencies, transaction fees range from $1.49 and up, depending on the currency being transferred. Xoom also offers a Bill Pay service for which it charges a flat fee. Finally, for credit card payments, users may be subject to additional fees for a cash advance.
Remitly is an online mobile payment and money transfer company. Remitly offers two ways for NRIs to transfer funds to India – Express and Economy transfers – directly into the bank accounts of friends or family in India.
Express transfers allow NRIs to transfer money within four hours, in exchange for a slightly lower exchange rate. Eligible only for credit, debit, or prepaid cards, Express transfers incur no fees for transfers over $1,000, with a $3.99 fee for transfers less than $1,000. NRIs transferring funds through their credit card also incur a 3% processing fee.
Economy transfers, which require a bank transfer, provide a better exchange rate but take 3 to 5 business days to transfer funds. Similar to Express, a $3.99 transaction fee applies for amounts under $1,000. Economy transfers give you an approximately 0.5% better exchange rate compared to Express.
Transferwise allows NRIs to transfer funds to the bank account of their family or friends in India. Available via the web and mobile app, Transferwise provides a guaranteed rate to users, as long as they fulfill their payment obligation within 24 hours. If longer than that, the rate may be subject to change. Transferwise also offers a 5% rate limit. If rates drop by 5% during the guarantee period, transactions will be canceled and the money refunded.
Transferwise charges a fixed fee for the transfer, irrespective of the amount. For USD transfers to be received in INR, the fees are approximately 0.7%, in addition to ACH, wire, debit, or credit card fees, depending on your payment mode.
Transferwise also offers a borderless account, which is a multi-currency account geared to travelers, expats, and freelancers. The border-free account is a foreign currency account that holds 50 currencies, with six currencies (US Dollar, UK Pound, Euro, Australian Dollar, New Zealand Dollar, and Polish Zloty) eligible for local bank details. For a fee, account balances can be converted to different currencies within the account. Although there is no fee to set up an account, account holders still incur transaction fees.
Remittances to India are a common way for NRIs to support family, make investments, or own property in India. The past few years have seen a multitude of online players emerge, providing greater ease and lower cost for money transfers to India. With billions of dollars in transfers and significant fees generated by the industry, choose an online platform that suits your currency, speed, and cost requirements.