India: Migrants lose billions to unfair remittance money transfer system

Consumers International, March 09, 2012

Indian migrants across the world lose billions of US dollars every year to a complex and unfair international remittance system, says consumer organisation CUTS International.

A new briefing from CUTS International examines problems in international money transfer markets from a consumer perspective and suggests improvements.

USD$55 billion transferred every year

There are currently around 25 million Indians living outside their home country. The USD$55bn they send home every year to support their families plays an important role in developing the national economy, says CUTS. In fact, these remittances (as money transfers from migrants abroad are sometimes known) represent more than 25 times the amount of foreign aid to the country and double the foreign direct investment. In 2010 India received more remittances than any other country in the world.

Problems faced by Indian migrants sending money home

Despite an increasing number of skilled migrants leaving the country, many Indians residing abroad are not well educated and can find it challenging to seek redress from service providers when things go wrong. The CUTS briefing finds that money transfer services themselves are often complex to navigate and consumers are also faced with excessive pricing (often up to 20 percent of the amount being sent). A lack of effective competition also means that choice is often limited.

Other problems highlighted a lack of consumer information, unreliability of service, inadequate infrastructure and ineffective regulation of the sector.


First and foremost, CUTS believe that greater transparency is necessary in money transfer services. This would give consumers access to clear and understandable information, and support them in exercising their basic right to choose between different services and providers. An adequate regulatory framework is needed at the international level to ensure compliance with set standards and provide an environment that will encourage remittance service providers to benchmark and compete against each other. CUTS International is also advocating for the enhancement of consumer protection against fraud and in for effective dispute resolution mechanisms. Improvements in infrastructures would also increase access to other types of financial services, particularly in areas currently under-served. All of this must to be supported, CUTS say, with strong guidance from regulators and consumer groups on good practice and governance.

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