Sending money back home in times of shutdowns

By Jens Ischebeck

Since many years hard working people with foreign origins send large amounts of money back home to their families.

In times of Corona Virus and public shutdowns many family members think first on how to support their family and how to send them cash to overcome this crisis.

Already before the actual crisis these remittances grow nearly year by year.

The more astonishing it is that the transaction fees remain on a very high level.

That was the reason for me to have a closer look on this issue and to write an in-depth analysis article about how to send money on mobile phones for remittances.

The average remittance fee to African countries is approx. 9.4%, according to World Bank reports.

Why? And how can you avoid such high fees?

Actual situation with high fees:

For whatever reasons many customers still use long time established ways to send money to their loved ones, their families and friends.

They use either bank accounts (sending money from bank account to bank account) or Western Union and Moneygram, the two dominating companies of the remittance market.

But the downside of these two ways are the high occurring transfer fees.

Classic banks ask a fortune of fees for these transfer which they don’t like. Being an US bank and having to send money to a third world country bank account, full of financial restrictions and under the eyes of anti money laundering laws, that’s hard.

There are loop holes:

Me, I am working a lot with freelancers in various African countries, e.g. Kenya (learn more about it: send money to Kenya), Ghana or Nigeria. When I have to pay my bills, I usually have two different possibilities.

Solution 1:

I send my money to them using mobile money providers such as WorldRemit, Xoom or (for us here in Europe) Azimo.

How does it work?

Let’s assume, I want to use WorldRemit. WorldRemit is the world leader as money transfer app for remittances.

I open an account giving my contact data and my mobile phone number. I add a bank account or a credit card number which shall be used to draw the money from.

Then I select the receiver country and add a new recipient (name, mobile phone number, city).

As last step I chose the transfer method: bank transfer, mobile money, mobile phone airtime top-up or cash pickup.

Now all I have to do is to fill in the amount to send and that’s it.

WorldRemit texts me about each set of the transaction, so I am always informed about the procedure and where my money is.

Here is the WorldRemit fee table:

1.00 USD – 20 USD: 1.99 USD fee

20.01 USD – 50 USD: 2.99 USD fee

50.01 USD – 100 USD: 3.99 USD fee

100.01 USD – 150 USD: 4.99 USD fee

150.01 USD – 200 USD: 5.99 USD fee

200.01 USD – 300 USD: 6.99 USD fee

300.01 USD – 500 USD: 10.99 USD fee

500.01 USD – max limit: 13.99 USD fee

Solution 2:

You use a cryptocurrency to send the amount of money, e.g. Bitcoin (BTC).

This works the best with peer-to-peer (P2P) marketplaces such as Paxful, LocalBitcoins or Coinmama.

Let’s take the example of Paxful. Paxful is very well established in Africa. From an African perspective, Paxful is the number One.

The opening of a Paxful account takes more steps compared to mobile money apps, because of the enhanced security reasons for cryptocurrency applications.

Once you have enabled your account, you are in paradise 🙂

Paxful offers more than 300 different possibilities to buy bitcoins, starting from “normal” ways like paying from a bank account or a PayPal account up to buying bitcoins with gift card codes (Amazon, iTunes, etc).

As soon as you have your bitcoins bought in your wallet, you select the receiver wallet of your counterpart your family member or friend) and just send it there with one click.

No sending fees occur!

The receiver gets the bitcoins instantly and can sell them against cash in his country.

To be honest; my freelancer partners love this method!

The author is a specialist on money transfer apps and bitcoin based remittances for African remittances. Find him on Quora.

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