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Australia Remittance Market: Comparative Analysis of Key Players

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Australia Remittance Market: Comparative Analysis of Key Players Australia Remittance Market: Comparative Analysis of Key Players www.goMEDICI.com Copying or distribution without written permission is prohibited 1 Contents 1. Overview 03 2. Research Methodology 04 3. Comparative Analysis 07 a) Australia to India 08 b) Australia to UK 10 c) Australia to US 12 d) Australia to EU 14 e) Australia to Vietnam 16 4. Key Findings 13 5. Glossary 20 6. Appendix 22 Copying or distribution without written permission is prohibited 2 Overview MEDICI has always been interested in the developments of the consumer remittance space. This segment represents a massive market, great opportunities, and very promising players. We have closely followed the rise of many FinTech challengers in this space who have pushed the boundaries by challenging incumbents and banks with lower costs, higher speeds, and enhanced transparency related to remittance transactions. To understand this space better, we have analyzed a number of banks and MTOs in terms of their transfer fee and FX rates in some of the key regions across the globe. In this exclusive report, we present a comparative analysis of some of the major players – banks as well as MTOs – operating in the Australia market. List of players involved in List of corridors involved in the the study: study: o Commonwealth Bank of o Australia–India Australia (CBA) o Australia–EU o InstaReM o Australia–UK o OFX o Australia–US o TorFX o Australia–Vietnam o TransferWise o WorldRemit This research is funded by InstaReM. However, the research is independent and views expressed in this report are purely that of MEDICI. Copying or distribution without written permission is prohibited 3 Research Methodology For the scope of this study, MEDICI’s research methodology consisted of two different approaches: Actual Transactions and Desktop Research. Actual Transactions o An actual transaction worth AUD 1,000 was conducted only for CBA, for the corridor Australia-India. o For the above transaction, the receiving bank in India was ICICI Bank. o Screenshots for the above transaction are included in the appendix section of this report. Desktop Research o Desktop research was conducted for each of the six players involved in this study using the conversion tool on the bank’s/MTO’s website. o The transaction amount for this desktop research was AUD 1,000. o The corridors for desktop research were: • Australia–India (All players except CBA) • Australia–EU • Australia–UK • Australia–US • Australia–Vietnam o Screenshots of the conversion tool for each of these players are included in the appendix section of this report. Copying or distribution without written permission is prohibited 4 Research Methodology Key Points The scope of this study involves comparisons on the basis of transfer fees, FX rates, and estimated/actual amount received. Factors such as ease of setting up accounts, user experience, customer service, etc., have not been considered in this study. Also, the scope of this study is limited to the P2P remittance services provided by these players. In the process of desktop research in all the corridors, we were only able to obtain the upfront costs of sending money through banks and MTOs, i.e., fee and FX rates charged to their customers. However, there is a possibility that other hidden fees were involved in the process, which could not be assessed. CBA and WorldRemit charged the transfer fee over and above the amount to be sent. TorFX did not charge a transfer fee. OFX, InstaReM, and TransferWise deducted the transfer fee from the amount to be sent. InstaReM, WorldRemit, and TransferWise promise to include “Intermediate Landing Charges” in their transfer fee and guarantee the receipt of the exact amount shown by an end-to-end supervision of the transaction. CBA, TorFX, and OFX do not promise the same. Disclaimer: MEDICI does not vouch for the veracity of these claims. Copying or distribution without written permission is prohibited 5 Research Methodology Key Points (Cont.) TorFX does not provide its services in the Australia–Vietnam corridor. In the Australia-Vietnam corridor, TransferWise does not provide a guaranteed FX rate. The date and time of all the transactions/desktop research, except the Australia-Europe and Australia-UK corridor: Dec. 08, 2017. 1:30 PM to 3:30 PM, AEDT. The date and time for the desktop research in the Australia–Europe corridor: January 22, 2018. 3:30 PM to 4:00 PM, AEDT. The date and time for the desktop research in the Australia–UK corridor: February 07, 2018. 1 PM to 1:30 PM, AEDT. Source for mid-market FX rates: www.bloomberg.com/currencies Copying or distribution without written permission is prohibited 6 Comparative Analysis Copying or distribution without written permission is prohibited 7 Actual Transactions/Desktop Research Corridor Transaction Value Mid-Market Rate Australia–India AUD 1,000 1 AUD = 48.465 INR CBA (Actual InstaReM OFX TorFX TransferWise WorldRemit Transactions) Amount Payable at 1,006 1,000 1,000 1,000 1,000 1,003.99 Source# (AUD) Transfer 6 5 15 0 6.95 3.99 Fee# (AUD) Amount 1,000 995 985 1,000 993.05 1,000 Sent# FX Rate# 46.286* 48.459*** 48.0023**** 47.4029* 48.45978** 47.851**** FX Markup# (Over Mid- 4.7% 0.01% 0.95% 2.19% 0.01% 1.26% Market Rate) Amount Received# 1,000*46.286 995*48.459 985*48.0023 1,000*47.4029 993.05*48.45978 = 1,000*47.851 (Expected, = 46,286 =48,216.71 = 47,282.27 = 47,402.90 48,122.98 = 47,851 INR) Amount Received# 45,460 NA NA NA NA NA (Actual, INR) Difference# 826 NA NA NA NA NA (INR) *Indicative FX rate **Guaranteed FX rate ***Real-time FX rate ****Not clear if the FX rate is indicative/real-time/guaranteed #The definition of these parameters can be found under the glossary section. (Page 20) Copying or distribution without written permission is prohibited 8 Actual Transactions/Desktop Research Australia–India Notes: o In this corridor, the actual transactions were conducted only through CBA. For all other providers, desktop research was conducted. Thus, the comparison parameters “Amount Received (Actual)” and “Difference” are only applicable to CBA and are not applicable to the other providers. o CBA charged the transfer fee upfront, over and above the amount to be sent (AUD 1,000). Thus the amount payable at source for CBA is AUD 1,006. Also, it clearly mentioned that the received amount can be less than the indicative expected amount. This, indeed, was the case as there was a significant difference of INR 826 in the indicated amount and actual received amount. o According to CBA’s conversion tool, the amount expected at the receiver’s side, as per the indicative FX rate, was (1,000*46.286) INR 46,286. However, during the actual transaction conducted through CBA, the received amount was INR 826 less than the expected amount. Since this difference is very high, we are not certain if this amounts only to the real FX rate being very high as against the indicative rate, or if there are some hidden fees involved. (We have already covered hidden fees under our research methodology for desktop research). o WorldRemit also charges a transfer fee of AUD 3.99 on top of AUD 1,000. Thus the amount payable at source for WorldRemit was AUD 1,003.99. o WorldRemit, on its website’s conversion tool, shows the FX rate as 1 AUD = 47.85 INR. Here, we have mentioned the rate as 47.851 based on the amount sent (AUD 1,000) and the expected amount received (INR 47,851 as mentioned on the conversion tool’s screenshot in the appendix section). Copying or distribution without written permission is prohibited 9 Actual Transactions/Desktop Research Australia–India Notes (Cont.): o InstaReM provided real-time FX rates. TransferWise provided a guaranteed FX rate (for 48 hours). TorFX and CBA provided an indicative FX rate. For OFX and WorldRemit, it wasn’t clear whether the FX rates were indicative, real-time or guaranteed. o For this corridor, InstaReM and TransferWise provided their services at the mid- market FX rate. However, InstaReM charged a lower transfer fee when compared to TransferWise. o Among all the players compared in this corridor, CBA had the highest markup on FX rates and OFX charged the highest transfer fee. TorFX didn’t charge any transfer fee but had a significant markup on FX rates. o Based on the desktop research, InstaReM was found to provide the most cost- effective remittance service among all the players compared in this study for the Australia–India corridor. Copying or distribution without written permission is prohibited 10 Desktop Research Corridor Transaction Value Mid-Market Rate Australia–EU AUD 1,000 1 AUD = 0.6536 EUR CBA InstaReM OFX TorFX TransferWise WorldRemit Amount Payable at 1,006 1,000 1,000 1,000 1,000 1,003.99 Source# (AUD) Transfer 6 5 15 0 6.95 3.99 Fee# (AUD) Amount 1,000 995 985 1,000 993.05 1,000 Sent# (AUD) FX Rate# 0.6182* 0.6536*** 0.6406**** 0.6411* 0.65363** 0.64603**** FX Markup# (Over Mid- 5.41% 0 1.99% 1.91% 0 1.16% Market Rate) Amount Received# 1,000*0.6182 995*0.6536 985*0.6406 1,000*0.6411 993.05*0.65363 1,000*0.64603 (Expected, = 618.2 = 650.33 =630.991 = 641.1 = 649.09 = 646.03 EUR) *Indicative FX rate **Guaranteed FX rate ***Real-time FX rate ****Not clear if the FX rate is indicative/real-time/guaranteed #The definition of these parameters can be found under the glossary section.
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