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Dec
29
2011

Review and Comparison of Money Transfer Services to India

Money to India Options ReviewOne of the critical needs for Indians who travel abroad for work will be transferring money to India for taking care of their liabilities back home

There are a lot of money remittance services available for this. I have done some detailed research to compare the leading money remittance services. Just like everyone else my objective was simple; I want the highest exchange value for the money I transfer.

I am going to compare the remittance services for transferring money from United States to India for now.

I am going to take a scenario of sending $ 1,000 from US to India and compare the service charges and net worth I am going to get receive finally. Let’s take the market exchange rate as of today (28-Dec-2011) which is $ 1 = Rs. 52.88

 

Service Type Exchange Rate (Rs) Service Charges Transfer Duration My Final Net Worth Comments
Xoom Fixed 52.35 $ 2.99 1 Day Rs. 52,088 No service charges if $1500 or above
MoneyGram Indicative 52.91 $ 12 3 Days Rs. 52,275 No bank deposit at destination. Branch pickup required
Western Union Indicative 52.36 $ 10 3 Days Rs. 51,836 No bank deposit at destination. Branch pickup required
State Bank of India Indicative 52.71 Rs. 83 7-8 Days Rs. 52,627
ICICI money2india Indicative 52.66 Rs. 54 7-8 Days Rs. 52,606
ICICI money2india Fixed 52.02 Rs. 54 7-8 Days Rs. 51,966
Remit2India Indicative 52.32 $ 5 3 Days Rs. 52,058
HDFC Quick Remit Indicative 52.68 Rs. 58 5 Days Rs. 52,622
Axis Bank Indicative 52.72 Rs. 58 5 Days Rs. 52,662
Citi Remit Indicative 52.88 $ 1 5 Days Rs. 52,827

 

Let’s understand some key terminologies from the table above:

Fixed Exchange Rate vs Indicative Exchange Rate

Fixed Exchange Rate assures you that the exchange rate value is locked for you. This means you will know the exact amount you are going to receive on the day of transfer initiation. However only few service providers offer this option.

On the other side most service providers go with the Indicative Exchange Rate option. This means while placing an order you will be given an estimated exchange rate value based on the current market rates. But the actual exchange rate value will be decided based on the actual market rate on the day of depositing the amount into the destination bank account. So the exact amount you will be receiving will change slightly based on the exchange rate fluctuations. It could be slightly lower or higher than the originally estimated value. Most service providers offer this option because they can initiate the buy/sell transactions of the currency based on the orders they receive. In other words they take reduce their risk of losses compare to the fixed rate players.

For fixed rate providers they will have to keep some decent reserve of dollars in advance and they could end up in slight losses if exchange rates fluctuate wildly. So they will hedge their risk by offering lower exchange rate which would be well below the market rates.

 

Exchange Rate

Even though exchange rates will be sometimes appealing the final net worth or the amount you are going to receive is what is more important. In the table above you will notice that the exchange rates are pretty close among many service providers, and in some cases some providers offer exchange rates almost equal or slightly above the market rates which might sound little unrealistic. This is because each service provider follows a different approach in setting the exchange rate value in any given day. For example, Xoom must be having a huge dollar reserve with them to offer a fixed rate service for the consumers and they will determine the exchange rate value on a given day based on the their purchase price of the dollar (which could be on the previous day). Whereas Indian Banks always fixes the exchange rate based on the current market because they will likely execute the buy/sell transaction based on the orders they take at the end of a given day.

As a result, Xoom might be having slightly better rates against Western Union for few days and the trend could suddenly reverse where Western Union could be having higher rates than Xoom. However ideally this will not be a huge difference.

Banks offer slightly higher exchange rates with the higher value transactions. For example, HDFC bank currently offers Rs. 52.68 per dollar up to $ 1000, but between $ 1000 – $ 3500 they offer the exchange rate of Rs. 52.76. However with the private players only service fee will vary and the exchange rates usually will not differ with the amount of transaction.

 

Service Charges

Generally there are two options to initiate a transfer. The commonly adopted option is to debit from a US bank account directly, it is called Account Hold or ACH. The service charges indicated above are based on this option. There is an alternative option which is to pay through credit or debit card. But the service charges for the same could be very high. For example for a $1000 transfer xoom charges a service fee $ 2.99 for ACH option. But for the same transfer through debit/credit card the sender will be charged nearly $ 40. However paying through debit/credit card means the transfer will take place slightly faster than the ACH option.

Compare to the private providers like Xoom or Remit2India opting for transfer with Indian banks could be better option because of the lower service charges in general. For Indian Banks the service charges again will be pretty close to each other that’s because they are all centrally regulated by Reserve Bank of India and they all need to follow the similar service tax treatment.

Indian banks follow the service charge structure as 0.1% of the transaction amount (up to Rs. 100,000). This service charge amount further service taxed (just like any other banking service). Only State Bank of India additionally charges another Rs.25 Per transaction as Foreign exchange conversion fee.

 

Transfer Duration

The transfer duration provided in the table above means Number of Working Days. So the private provider such as MoneyGram or Remit2India on average takes about 3 working days to complete a transaction (Source Bank to Destination Bank). Whereas the Indian banks on average takes about 7 working days. But you will notice that Indian banks always offer superior exchange rates but due to the lengthier transfer period there could be reasonable change at the currency value in positive or negative bios based on the trend. For example as of today the chances of Rupee value depreciates further against dollar is very high in the next 10 calendar days. So transferring through banks may be a good idea. We cannot obviously predict the trend every time!

 

Final Net Worth

This is the most important figure for everyone. Many people get fooled just by noticing the exchange rate and forget about the service and other charges applicable with the transaction. For example, you will notice that the MoneyGram offers the highest exchange rate in the table above, but they also have the highest service charge per transaction. As a result the net worth is one of the lowest among all service providers.

Whereas many people would not understand the complex fee calculations behind Indian banks (Conversion Fee + 0.1% of transfer value + Service Tax) correctly and simply will ignore them. But if you do the math correctly you will notice that the Indian banks charges the lowest service fee compare to private players. For banks obviously this is just one of their ranges of services for their consumers, their business or profitability not relying on this particular segment. This is just an add-on service for their consumers and they will also make use of this window to increase their Foreign exchange reserve as well.

 

Non-Bank Transfers

Among the service providers listed above The Western Union and MoneyGram are different from others because these two Institutions will not deposit the money into a destination bank account, Instead someone from the receiving end has to visit their branches/agents in person and receive the money. This approach might work for the cities or but at rural areas these players may not be having any branches. So it would be a pain for someone to travel to the nearest branch and collect the money frequently. More over now a day’s everyone have access to ATM machines even at rural areas so it might be a good idea to deal with the players who are able to deposit the money directly into some bank accounts for normal circumstances.

 

Initial Setup

All the transfer duration indicated in the table above represents the duration required for a normal transfer. However if you are going to do it for a first time you will have to be ready to complete the initial formalities which will likely take more time during your first transaction.

For example if you want to setup an account with HDFC quick remit then you will have to provide your US bank account details to them, verify your identity with SSN and they will also give you a call directly for completing the KYC (Know Your Customer) formalities. They also will make a test deposit at your US bank account and will request you to enter the deposited amount for verification purpose. To complete all these formalities it would take at least 7 working days before you could actually initiate your first transaction.

With private players like Xoom the process is little faster but still the Identity and Bank account verification will be mandatory for security purposes.

 

Winners List

Let’s now review about the winners among the leading players.

Among the Fixed Rate service providers (only 2) Xoom provides the highest net worth and the fastest transfer (just 1 day!), so if you don’t want to play with the exchange rate fluctuations Xoom could be your choice.

Among the Indicative Rate service providers Citi Remit offers the highest net worth and reasonable time frame for the transfer.

 

Recommendation

My personal recommendation would be, have your account setup with at least 2 service providers. For routine transfers through one of the Indian Banks, even though they are little slower they always offer highest value for your money. As an alternative option having an account setup with one of the private players like Xoom would highly help, because at times we would need the money to reach the destination urgently for variety of reasons (like EMI dues or medical needs etc). When there is an urgency losing a little money over faster transfer wouldn’t matter, but we cannot setup a new account and complete all the verification formalities at the last moment.

Finally avoid dealing with non-reputed brands while transferring your money. Sharing critical personal details such as bank accounts, SSN etc with them may not be very safe. It is always safe to deal with reputed names while transferring the bulk money for your own safety. After all it is your hard earned money!

I hope this article was Informative, feel free to post your comments or questions.

 

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19 comments

  1. Deepak says:

    Excellent article…!!

  2. Levitra says:

    Hi man! I completely agree with your opinion. I???ve just shared it on the social networks.

  3. Kimberly says:

    Howdy! It looks as though we both have a passion for the
    same thing. Your blog, ” Review and Comparison of Money Transfer Services to India

  4. Anonymous says:

    Thank you for the analysis!
    YOu have saved a lot of time for us.

  5. Shankar says:

    Thanks for the analysis.
    You have saved a lot of time of us!

    1. electron says:

      My pleasure!

  6. Srikanth says:

    Would you please update the analysis? This is like two yr old analysis.

  7. kamayani says:

    thanks so much for such an analytical point of view. it was very helpful and convincing!

    1. electron says:

      You are welcome!

  8. Ravi says:

    wonderful information!!!.
    do you have same kind of info for UK(GBP) to INR?

    1. electron says:

      Thank you Ravi. At this point i don’t have a post on GBP to INR. But i will keep that topic in my pipeline.

  9. Somaliland Travel says:

    @ It is really interesting post. I never read such kind of post. It impressed me. Thanks for sharing

    1. electron says:

      Thanks for your valuable feedback!

  10. arun says:

    Thanks for a birds eye view kind of review.. helped me a lot

    1. electron says:

      Thanks for the feedback!

  11. KHALEEL HUSSAIN MOHAMMED says:

    Thank you bro for the information,its worth a lot

  12. jimmy says:

    I really like the way you have explained the whole article. It is very informative.

  13. jimmy says:

    I really like the way you have explained the whole article. It is very informative.
    Regards,

  14. TJ says:

    Good Info.

    Can you transfer money into your NRO account from abroad ? not NRE but NRO account ?

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