Money exchange houses in the UAE will gradually increase charges in certain remittance corridors for the first time in five years after receiving approval from the UAE Central Bank to introduce an optional fee adjustment, Mohammad Al Ansari, chairman of Al Ansari, has said.
“Exchange houses will not increase fees immediately, it will take at least another two months and will be gradual,” Mr Al Ansari, who is also chairman of the Foreign Exchange and Remittance Group (Ferg), said.
“It will be implemented after studying each corridor and could happen in the second quarter of this year.
“This has been in discussion with the UAE Central Bank for some time. We tried to keep the rate as it is for the past few years and were absorbing the increase in operation costs despite many new regulations and requirements from foreign regulators.”
On Monday, the Ferg said exchange houses could opt for a minimum fee increase of 15 per cent, which would typically equate to Dh2.50.
This marks the first fee adjustment in five years and the decision recognises the evolving regulatory landscape and related cost increases since the previous update, the Ferg said.
Remittances to poor and middle-income countries grew an estimated 3.8 per cent to reach $669 billion last year, according to the World Bank’s migration and development brief in December.
India was the top remittance recipient country last year, receiving funds worth $125 billion, followed by Mexico at $67 billion, China at $50 billion, the Philippines at $40 billion and Egypt at $24 billion, the Washington-based lender said.
The US continued to be the largest source of remittances, the report added.
The decision to increase fees will depend on individual exchange companies and their operational costs, Mr Al Ansari said.
The fee increase is expected to be applicable for remittance services through physical branches, while remittances offered through mobile apps of exchange houses will most likely remain unchanged or even reduced to maintain competitiveness, the Ferg said.
Customers have the option to transfer money online, and fees may even be reduced in some corridors, Mr Al Ansari added.
“Some new players, like non-traditional exchange companies, may even provide services online for free or a very minimum rate for marketing purpose,” he said.
The decision will not affect customers transferring large amounts of money. Instead, it may be more significant for people sending lower amounts, he added.
“As long as there are options, I don't think this move will negatively affect customers.”
The approval follows an evaluation of operating expenses associated with maintaining service standards and complying with regulatory requirements, according to the Ferg.
“There has been a big jump in expenses since the pandemic,” Mr Al Ansari said. “This relates to system upgrades, regulatory requirements, rent and manpower costs, Emiratisation and the introduction of corporate tax at 9 per cent.”
Lulu Exchange, Al Fardan Exchange and Delma Exchange declined to comment on the remittance fee rise.
Despite the increase, it is anticipated the average remittance cost of sending $200 will remain at less than 3.5 per cent in the UAE, the Ferg said.
This is significantly below the global average of 6.2 per cent in 2023, according to the World Bank’s Remittance Prices Worldwide database.
The revised price also remains within the UN’s Sustainable Developmental Goals, which aims to eliminate remittance corridors with costs higher than 5 per cent by 2030, the Ferg said.