There’s a financial scandal most people have never heard of and it’s hitting the poorest hardest. The shameful mis-selling and pay day loans rip-offs are well-known but now it’s time to turn our attention to excessive charges to send money overseas, the ‘transfer tax’.
Every week, on high streets across Britain, people send money to their relatives overseas. Usually it’s small amounts but it makes a big difference to poor families. But before the money gets where it’s needed a big chunk is taken up in excessive fees and charges. That’s why I’m supporting World Money Transfer Day this Mother’s Day and the campaign to stop the transfer tax.
Let’s start with the facts. International money transfers are one of the biggest and best anti-poverty measures we have. Every year generous British people send over £2 billion a year to families abroad. That’s equivalent to around 18 per cent of the UK aid budget. That money is used to help pay school fees for nephews and nieces, to buy medicines for elderly parents, and to help cousins set up new businesses.
But each time someone transfers money they are hit by excessive fees and charges. A worker sending £200 from London to Lagos in Nigeria can pay fees of over 13 per cent - more than 50 per cent above the global average. We all expect to pay some fees to cover the cost of financial services, but there is strong evidence that these charges are excessive and are caused by a lack of competition and choice for consumers.
So, what can we do about it? First, we need to give customers the tools to shop around and find a better deal. There are two sides to that. On one side, transfer companies have to be much more transparent about their charges. At the moment it’s too hard to compare the complex web of fees and margins on exchange rates. On the other side we need to support financial education and financial inclusion so that customers can cut through the jargon and statistics to find the best value for them.
Second, we need to back innovative companies in the UK who are revolutionising the way people send money around the world. We all expect to be able to bank online, and in developing countries the spread of mobile money has brought text message banking to millions. London tech firms are applying a new peer-to-peer model of money transfers at a fraction of the cost of traditional money transfer firms. If they succeed it’s a win-win: lower prices for customers and growth for UK firms.
Third, we need to focus attention on the issue. The campaign against rip-off pay day lenders has shown that if we keep the pressure on we can change things. That’s why I’ve raised the transfer tax with the Prime Minister and put it on the parliamentary agenda. And now a movement is building: we’re working with the World Bank, diaspora organisations and migration groups to get the fees down
And lower fees are possible. This Mother’s Day I have helped to organise the first World Money Transfer Day, and have convened a group of money transfer companies who have pledged to offer no fee, no margin transfers for this one day - so you’ll save money, your family will receive more, and together we’ll send a signal that this hidden financial scandal needs to stop.
World Money Transfer Day will show that it is possible to offer responsible, low cost money transfer services – but in the long term we also need action from the international community, banks, and regulators. So please join me in signing the petition at www.stopthetransfertax.com to help stop the transfer tax rip-off.Reuse content