Many migrants are turning to third-party services such as Wise, Orbit Remit and Western Union for remittances. Photo: RNZ / Yiting Lin
New research reveals that more than 58 percent of South Asians in New Zealand send up to 10 percent of their income home each year.
The survey, conducted by Octopus Research between 14-23 May, canvassed migrants living in New Zealand.
It found that 37 percent of respondents used traditional banks for remittances, with 66 percent unaware of the fees typically charged by domestic banks for their transfers.
Many migrants were instead turning to third-party services such as Wise, Orbit Remit and Western Union to transfer funds.
"I think the fee that banks charge is a bit higher for overseas transactions," said Jacob Job, who is based in Hamilton.
Originally from Kerala, India, the 31-year-old has lived in New Zealand for seven years.
"Most often [banks] offer a lower exchange rate and a higher fee for the transaction," he said.
Job typically used the Wise app to carry out overseas transfers, finding it more convenient and offering better exchange rates than banks.
However, he relied on banks for larger sums.
"I trust a bank's system," he said. "It's more familiar than these apps, that's all."
He said he didn't transfer money regularly, mostly when travelling.
Jacob Job typically uses the Wise app for overseas transfers, finding it more convenient and offering better exchange rates than banks. Photo: Supplied
Auckland-based Rahul Chopra has preferred banks over third-party services for transactions for more than 20 years.
"I've only used Wise twice but still prefer banks for their reliability," said Chopra, 40.
While he acknowledged third-party services might offer higher exchange rates, he valued the trust and physical presence of banks.
"My money is safe and secure in the bank and, since it's already in the account, I prefer doing it within the bank's infrastructure," he said.
Dulani Jayasuriya, a finance lecturer at the University of Auckland, said both banks and third-party services had pros and cons.
She said banks were heavily regulated and offered robust security measures, which is crucial for large transfers.
New research has found that 37 percent of South Asian respondents use traditional banks for remittances. Photo: RNZ / 123rf
She said customers also benefitted from banks having physical locations as well as their partnerships with other banks, which can facilitate options such as cash pickups not typically offered by third-party services.
"Banks generally charge a combination of fixed and transaction fees, and transfers can take several business days to complete," Jayasuriya said.
She warned customers to pay attention to a bank's limited transparency in terms of the fees charged and exchange rates.
In contrast, third-party services such as Wise and Orbit Remit offered lower fees but were not as heavily regulated, leading to potential security concerns.
"Banks operate on secure networks like SWIFT (Society for Worldwide Interbank Financial Telecommunications), which has been used globally for many years," she said. "The security of third-party networks is less certain."
A comparison of online exchange rates for converting New Zealand dollars to Indian rupees on 18 June showed ANZ offering 49.55 rupees, Westpac 49.53 rupees and ASB 49.44 rupees.
In contrast, Wise offered 50.74 rupees, while Orbit Remit offered 50.32 rupees.
Jayasuriya said banks tended to offer lower exchange rates due to the margins they worked with.
"There's a buying rate and a selling rate," she said. "The bank buys at a rate that's profitable for them and sells at a rate that's also profitable, always maintaining a margin."
Tristin Dakin is the country head for Wise in New Zealand and Australia. Photo: Supplied
Tristan Dakin, country head for New Zealand and Australia at Wise, said the service was committed to transparency, urging better fee transparency from New Zealand banks.
"It's concerning to see such a lack of understanding around remittance fees," he said.
"These fees are often hidden, causing migrants to lose thousands annually, money better used to support their families back home.
"People deserve to know what they're paying for, and better yet, they shouldn't have to pay such high and exploitative fees in the first place."
Nigel Seeto, marketing head for Orbit Remit, agreed.
"Often banks are wedded to the SWIFT services and have correspondent banks to execute cross-border transfers that can add time and cost to the transaction," Seeto said.
A spokesman for ANZ said the bank provided an indicative foreign exchange conversion rate on its website, which moved dynamically throughout the day.
"To manage any currency cost or risk, ANZ offers foreign currency accounts, where customers can deposit funds when the exchange rate is favorable," the spokesman said, adding that ANZ did not hide fees from customers.
A spokesperson for Westpac said its exchange rates were competitive with other major banks.
"Our website's currency converter provides transparency around rates and transaction fees," the spokesperson said.
Jayasuriya advised those choosing between money transfer options to undertake thorough research beforehand.
"Whatever option you choose, do your research first," she said.
