Speed of transfers
An additional reason for the important use of informal remittance channels might be differences in the time of transfers. It is however difficult to assess the speed of formal transfers as this not only depends on the intermediate banks but also on the standardization of the payment system of the different banks involved in the transfer. Furthermore, different practices of the recipient may speed up the transfer44.
For this reason, the users’ indications about the speed of the different transfer channels might probably be the best estimate as it is an experienced and aggregated one.
Informal remittance transfers are by far the fastest ones – except when compared to MTO services. Figure 28 shows the mean number of days a transfer takes through a given channel, according to their correspondent users. Given the geographical proximity of Serbia to Switzerland, hand carry transfers do last on average between one and two days until they arrive to the receiver. They are most often handed over directly at the receivers’ home.
44 Holding a foreign account in the Postal Savings Bank (the remittances service partner of the Swiss Post), for example, decreases the time of the transfer through that channel, as any cash payment is directly credited on that account. Otherwise, it takes an additional two days to reach the customer in order to advice him on the value date.
Figure 28: Mean number of days till the transfer arrives to the receiver in Serbia, by remittances transfer method, 2006.
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MTO Bank Postbanking Handcarry Registred mail Bus driver Transfer methods (N)
Mean nbr of days for transfer
Source: Survey 2006.
Money handed over to bus drivers arrives on average a little bit later (the transfer lasts about 2 days) but is still much faster than bank or post-banking transfers (who last on average between 5 and 6 days). Even if MTOs provide the fastest transfer services, their high cost proportionally to the transferred amount is certainly one of its greatest disadvantages as compared to the informal means.
Given that health costs assistance is one of the principal purpose of remittances transfers (see chap. 8.3), the speed of transfers – especially the sporadic ones – is certainly a very important consideration for remittances transfers.
Cost of Transfers
The survey does not provide satisfying results as regards costs. Indeed, the questionnaire reported the costs for each channel used. The analysis of this data showed inconsistencies and anomalies, however. This was not the result we have been looking for, but it shows very well the intransparencies of the transfer channels and transfer phase. However, in order to gather the required information we undertook personal and telephonic interviews with the channel providers theselve. Put differently, we had to relay on the channel providers answers themselves. This method showed however the disadvantage, as Swiss (post-) banks do not always know about the transferring fees of the intermediary and recipient banks (fixed fees, fees that depend on the transfer amount, no fees
at all). Therefore the information mostly only concerns the costs on senders’
side.
Two types of formal remittance channels from Switzerland to Serbia can be distinguished. The first is direct in that the financial sender institution is directly connected to a partner in Serbia and therefore can provide accurate information on the cost of transfers. The second type of channel is indirect and characterized by the involvement of intermediary banks, given that the sender institution has no direct connections with local financial institutions in Serbia.
The first type concerns the services of Western Union as well as of the post bank. The Western Union’s fees are defined proportionally to the amount of remittances transferred. The higher the amount transferred, the lower the fee. . For an amount of CHF 300.- the fees represent 10% (Table 14). This type of transfer presents the major advantage over other formal transfer methods that neither the sender nor the receiver needs to be banked. Western Union’s services in Switzerland are restricted for financial institutions (falling under the Anti-Money-Laundering law), however: since 2004, the post bank only has the right to offer this service to senders holding a post bank account.
The post bank also has a direct partner in Serbia (namely, the Postal Saving Bank), and the fees on the sender’s side are fixed. Two transfer options exist.
The use of the first one, the Giro International, is open to all migrants (having or not a post bank account) but is restricted to transfers on Serbian bank accounts – so the recipient has to be banked. The correspondent fixed fee is one of the lowest in the Swiss remittance market, as it represents about 5% of the transfer value. However, depending on the recipient bank, additional fees proportional to the amount sent may raise the cost of transfer. The second option is a money order, the Cash International, which does not ask for a bank account on the recipient’s side. If the sender is a client at the post bank, the fixed fees are low (5% of the transfer value), but if not, they rise to CHF 40.-.
All other Swiss banks offer remittance transfers through indirect channels (Table 14). Given that the choice and the number of intermediary banks depend upon the choice of the final recipient bank in Serbia, the total fees of the transfer are not known in advance. Indeed, the sender institutions apply fixed fees on the transfer, without any foreknowledge of what fees the different intermediary and final banks apply (fixed fees, proportional to the transfer value or no fee at all).
Switzerland is not an exception in the international community. This uncertainty about final fees for remittance transfers is common45.
45 The same problem also exists in Great Britain, for example. Indeed, the temporarily actualized information about fees provided online by DFID only concerns information known
The information in Table 14 might therefore be underestimated. Indeed, the fees on the sender’s side are low, varying between CHF 10.- and 25.- (3% to 8% of CHF 300.- transfers).
Compared to the level of fees of formal transfer channels and especially to their uncertainties, informal channels are by far the least expensive ones. Hand carry transfers cost nothing given that the money is handed over to a friend or a family member travelling to Serbia. Bus drivers do not ask to be paid for the transfer of money either. However, according to one bus driver, a commission of about 2 to 3% of the transfer value is usually requested if the sender is not a friend of his.
As compared to the fees of formal remittance services (see Table 14), the institutionalised commission for the bus driver is still the cheapest way to send remittances, especially if these add additional fees not known in advance by the sender banks.
from the sender institution’s side (see notes on page
http://www.sendmoneyhome.org/Contents/Online%20database.html).