Money Transfer Survey Results

In 2005 the government completed a survey into the ways that people send money abroad from the UK. With the expanding multi-cultural status of the UK, an overwhelming number of immigrants working in the UK are sending money home to family or for business interests abroad. The government felt that this particular market sector – the money transfer industry – should be more transparent in its interests and offerings to customers.

In the industry, we know that the three big factors for consumers to choose a method of sending money, and a company to send it through, are trust, security and of course price. But one must look at the survey results and know that the customer base of a bank versus a money transfer operator such as Western Union, will have different clientele and therefore the motivating factors for these customers will vary.

Western Union customers, for example, often don’t have bank accounts or would rather avoid using bank accounts to transfer their money. This raises the importance of sending money with a secure and trusted operator. Customers want to know that their cash is safe when they hand it over. Banks, however, don’t need to address issues of security as this is automatically assumed. Their issues arise with price and time.

What follows are some interesting points taken from the survey, highlighting the needs of customers and how each type of transfer company fulfils them. All sections have been copied verbatim from the survey analysis.

Banks

• Exchange rates show consumer/market rates rather than spot rates. Some providers were unable to provide exchange rates for the date specified on the questionnaire, and instead provided a rate for the date of completing the questionnaire. In some cases, providers are aware that recipient fees may apply in the receiving country.
• Services are primarily through face-to-face transaction, although some providers offer internet and telephone services.
• Coverage in recipient countries is difficult to quantify for banks, as they may be able to send to a variety of partners. Some providers give names of partner correspondent organisations. Some banks have limited links with recipient countries due to risk and ethical policy.
• The speed of transfer tends to vary for banks, as much depends on the processes of the receiving bank. Speed tends to be quicker with MTOs and generally does not depend on the receiving institution.
• Most providers have a process by which they can verify the completion of the transaction, but this usually needs to be requested.
• No provider indicates that a fee is charged to the recipient. Some suggest the recipient agent or bank may apply a fee, although UK providers are not aware of what charges can be expected. Fees may depend on the currency paid out.
• Providers tend to guarantee the exchange rate they offer. However, they do not tend to guarantee the payout, due to potential recipient charges.
• Transfer fees do not vary considerably between the amounts specified in our questionnaire (£100 and £500), as banks tend to charge a flat fee. Fees for both the £100 and £500 amounts vary from £10 to £30. The transfer fee accounts for a smaller percentage (from 2% to 6%) for sending £500. Full tables showing provider fees and services for transferring money (£100 and £500) to each of the six countries are shown in each country section.
• Eight out of the 10 banks guarantee the exchange rate when the transfer is made, however banks will not guarantee how much will be paid out, as there are often recipient fees.

Money Transfer Operators

Independent money transfer organisations are familiar with remittances and enquiries about remittances to many countries. Overall, the mystery shoppers had a more consistent and positive experience with these organizations than major high street banks and building societies.

However, during fieldwork the tsunami disaster occurred (26/12/04). After this date, a large number of individuals from varying cultural backgrounds asked high street organizations about remittances to Asia. It is believed that a ‘tsunami effect’ may have made a difference (for example with improved customer service). Some organisations assessed offered a special discounted charge on remittances to tsunami-affected countries, such as MoneyGram (a flat rate of £5) and NatWest & Western Union (free service).

Independent money transfer operators are in the business of remittances and subsequently they appear to have much better polished, speedier procedures, have more readily available literature and offer targeted leaflets, such as ‘India - I'm sending so much more than money to my family’ (Western Union). It was also found that they provide a more focused level of customer care and assessors said that they were more likely to use these organisations in real life and recommend them to relatives/friends than major high street banks and building societies.

The following information given on the survey analysis was from focus group qualitative research.

• People sending money to other countries do so for a number of reasons, including family subsistence, ad hoc contributions, business building, project building and alms giving.
• Choice of provider depends on what is required with each money transfer – some may be urgent and require speed, others may be large amounts and require security.
• Security is the overriding factor in choosing a money transfer provider. Speed and cost are traded off as a second key factor.
• A good network in the receiving country is a further key criterion.
• UK banks and building societies are perceived as trustworthy and secure, but slow and expensive for small transfers. Country-specific banks, on the other hand, are not trusted by those from African nations but are used by those from India and Bangladesh. Countryspecific banks are perceived as inefficient compared with UK banks.
• Customers felt that banks could improve customer service, including language skills and knowledge of countries to which people send remittances.
• Informal methods are viewed as cheap but risky.
• Identification requirements are viewed as onerous, particularly at UK banks and building societies. However, with adequate information, as the mystery shopping research shows, this problem appears to lessen.
• Information tends to be gained by word of mouth. Focus group participants elicited a strong desire to be able to source reliable, comparable information on the services available to them.

High Street Money Transfer Operators

There is a strong overall awareness of high street MTOs. The most frequently mentioned is Western Union and this would appear to be the best known, with highly visible advertising and a strong presence on the high street. In addition to operating as a standalone storefront, Western Union services are also available via local off-licences, grocers and other shops. Others mentioned included MoneyGram and
EuroBangla.

Word-of-mouth serves high street providers well. For Nigerians and Ghanaians, Western Union is highly visible on their own high streets as well as in the receiving countries.
Chinese communities also have a high awareness of Western Union, but this is highest among those sending money to cities in mainland China or other South East Asian towns and cities. Some Indian groups mentioned Western Union. Bangladeshis have a relatively low awareness and usage of this provider, or indeed many of the other high street providers.

Accessibility of information on high street providers is thought to be good overall, with users able to obtain the required information directly from the high street outlets. It is widely accepted that proof of identification is required when sending larger amounts. Western Union’s high visibility and position as an established brand means security is not a cause for concern among its users.

Closely linked to security is the issue of trust. The frequency of use and recommendations ensure that high street providers such as Western Union are highly trusted. The simplicity of the service also lends to its image as a trustworthy provider. However, this is not the case for smaller or unbranded high street providers where anxieties regarding security and trust are common.

Some high street providers are seen as expensive, although this is not necessarily a barrier as other key factors (such as security and speed) override this. Providers such as Chequepoint are considered cheaper.

In order for a high street provider to achieve popularity among a particular group of people, it needs to be well known in the country of origin. [NB Western Union’s market share is small in Ghana as compared to some of the other countries in the survey]. The same cannot be said for Bangladesh, however, where even though Western Union has a presence in major towns (such as Sylhet, from where the vast majority of British Bangladeshis originate), the service is not often mentioned.

Western Union users tend to visit the high street provider and carry out the transaction face-to-face. This can be by cash, cheque or credit card and offers the kind of flexibility that users seek. It is generally acknowledged that the service is good for senders and recipients and very little improvement is needed.

Conclusions

Current provider preference

In terms of provider use, MTOs were cited as the type of provider used most often within the focus groups. This is because, in addition to providing security through well known brand names, they have a strong presence in the UK and in receiving countries. Overall, the mystery shoppers had a more consistent and positive experience with these organisations than with the major high street banks and building societies and the country-specific providers.

The provider survey shows that MTOs offer relatively favourable rates – particularly for African countries and for people sending smaller amounts. They are also seen to offer speed and convenience, in conjunction with trusted brand names.

Banks have an advantage with regards to issues of security and trust. There is a strong synergy between the key needs of the money transfer consumer, and the UK banks’ brands. However, the lack of easily accessible information, perceived slow service and stringent ID requirements means that the banks are not able to effectively harness this synergy.

Small, urgent transfers are a common remittance type, yet banks and building societies are perceived as costly and slow. This is reflected in the provider survey data, with banks appearing to take longer overall than MTOs to send money. MTOs tend to be able to send money within 24 hours to each of the countries, whereas for banks the average time taken is five days. As the focus groups indicate, timing can be a significant decision factor for remittance senders.

People often send money home through informal channels, such as with friends or family members who are traveling back to the country of origin. Although sending money through an agent is also said by focus group participants to be common. Informal methods are seen as cheap but risky. Formal providers have scope to attract users of informal remittance services if their products are appropriately designed and priced. These systems rely on trust and the extensive use of connections, such as regional affiliations, to move money.