7 Responses

  1. David Leeming
    David Leeming November 25, 2015 at 8:13 pm

    Regarding cost of international transfers, here is an example from my experience.

    One agency situated in a particular Pacific Islands country donated USD 100K equivalent in the local currency to a development project involving partners in multiple regional countries. A USD bank account was set up in the host country of the project’s organisation. The 100K in the local currency of the orginiating country was transmitted as a TT to this account. What arrived was 88K. So 12% or USD 12,000 was taken by the banking system in one transaction – in a matter of seconds. That is probably not a particularly extreme case.

  2. Bal Kama
    Bal Kama November 23, 2015 at 5:09 pm

    Thank you for raising an issue of great concern, not only among Pacific Island employees in Aust and NZ but also students who also have the added responsibility of supporting families back home with their limited scholarship allowances.

  3. David Leeming
    David Leeming November 23, 2015 at 7:45 am

    There are other financial inequalities that conspire against a level playing field for Pacific Islanders. The Internet always promised to reduce the “tyranny of distance”, providing the remote scattered island communities with new opportunities arising from globalisation.

    However in Solomon Islands where I live, and probably other regional countries, would be online businesses, eco-tourism operators and artisanal traders still lack access to online payment systems that support local bank accounts. Telegraphic transfers are not suitable as a general payment system for many reasons, they are expensive and thus prohibit small transactions, and customers expect one-click purchasing.

    The only real contender owing to it’s ubiquity is Paypal. However, it does not support local bank accounts here. This means that Solomon Islanders cannot offer it to their customers as payment system. As far as I know there are no other online payment systems that are as accessible as Paypal that would be available to local people here.

    For those expatriates and elites who have access to offshore accounts this is no problem. But why is this service – a normal aspect of commercial life in most of the world – not available here?

    Some time ago I asked Paypal online help about this and received the rather generic reply:

    “I understand that you want to know why adding a Solomon Islands commercial bank account can’t be added to a Solomon Islander PayPal account. Due to the challenges and complexities associated with the worldwide financial network, we cannot offer the option to add a Solomon Islands commercial bank account to a Solomon Islander PayPal account. We also cannot offer a firm date or timetable for expansion of specific services.”

    One possibility is that commercial banks here are resisting the introduction of such services. It is certainly true that banking services here are generally second rate compared to what the same banks offer in Australia and New Zealand.

    If we want true financial inclusion it has to be on equal terms with dominant economic powers. Over several years I have brought this question up in online forums such as the Pacific Chapter of the Internet Society, and with contacts in our Central Bank for instance, but there is no change in the situation.

    1. Jonathan Capal
      Jonathan Capal November 27, 2015 at 11:39 am

      Hi David,

      You may be interested to learn of a new operator serving Australia and New Zealand to the Solomon Islands. They will be covered in the next http://www.sendmoneypacific.org data collection in December and will then be listed on the website’s comparison tables. There is information about their service in the Solomon Islands news section of the website.


  4. Miranda Stewart
    Miranda Stewart November 23, 2015 at 7:16 am

    Do you know if any (and how many) remittances might possibly use bitcoin or cryptocurrencies? Or is this not really feasible for the pacific? See this article from last year. And this.

    There was a lot about this option in 2014 but I have not seen so much this year.

  5. Jonathan Capal
    Jonathan Capal November 17, 2015 at 3:12 pm

    Hi Ashlee and Stephen,

    Many thanks for your blog. It’s great to see the Pacific remittances issue receiving due attention.

    My company, Developing Market Associates (www.developingmarkets.com), on behalf of DFAT and MFAT, manage the SendMoneyPacific (www.sendmoneypacific.org) website that you have referenced. Over the past seven years we have recorded an overall reduction in cost but not to the extent that we would have liked – i.e. attaining the G20 5% remittance target.

    However what we have seen over the past seven years are significant cost reductions in the higher volume, more competitive corridors to Fiji, Samoa and Tonga that are dominated by Money Transfer Operators (MTO’s) rather than bank dominated (such as PNG which you have focused on). Bank costs have barely changed over the six years we have monitored costs, falling by just 2% (to 18.1%) by June 2015. MTO costs on the other hand have fallen by almost 35%, and for some of the most competitive/high volume corridors by over 50% for sending AUD/NZD 200 (e.g. Australia to Fiji: 17.99% in January 2009 to 8.24% in June 2015; NZ – Tonga: costs down 57% from 16.25% to 6.99%). For these competitive corridors, MTO costs are now approaching 5% for sending $200. For AUD/NZD 500 transfers, MTO costs are now below 5% for NZ – Samoa and Tonga, and at 3.79% for Australia – Tonga.

    Cost variations between providers for the same corridor continue to be very significant. The latest data for November for Australia – Samoa (AUD 200) reports a range between 2.59% to 26.99% – the difference between receiving WST 360 and WST 276 for the same value transfer!

    A further significant development in recent years has been the increase in available digital remittance services, particularly services paying out to mobile wallets in Fiji, PNG, Samoa and Solomon Islands. Since 2012, digital MTO services have doubled, from 17 to 34, across the 16 corridors covered from Australia and New Zealand. The growth in digital MTO services comes at a critical time during a fraught period for MTOs in Australia and New Zealand as they face operating difficulties or in some instances, closure, due to the de-risking issue.

    Unfortunately at this stage there is limited disclosed data on the actual volumes being sent via digital services, rather than traditional cash based MTO services and bank transfers. However, there is anecdotal information, via the surveys we conduct for SendMoneyPacific, seasonal worker surveys and interviews, and other communication that we regularly have with Pacific Diaspora communities through our outreach programmes for SMP, that Pacific remittance senders are increasingly using digital services.

    Please feel free to get in touch if you would like to explore the different services used by Pacific remitters that I have highlighted. We will also shortly be completing Q4 data collection and analysis.

    Many thanks,

  6. Vinny Nagaraj
    Vinny Nagaraj November 17, 2015 at 9:12 am

    [These comments reflect personal views and do not in any way represent official positions of the NZ Government]

    Hi Ashlee and Stephen,

    I think there are a few factors at play. On your question about why Pacific costs are stagnant relative to global declines, a lot of that “inertia” in price movements in the Pacific is probably explained by structural constraints such as low scale and volume. Other things constant, compared to the Saudi Arabia / UAE – Phillippines corridor or the UK – Nigeria corridor remittances from A/NZ to the Pacific are always likely to be more expensive.

    Many global innovations, especially electronic platforms that more efficient and effective “bunching” of smaller remittance transactions by remittance service providers, have had an impact in the Pacific (especially if you move your data set out a few years before 2011). But ultimately they face the same structural constraints – larger corridors can “bunch” more volumes, so they end up benefitting more from these solutions in relative terms to the Pacific.

    There are also strucutral banking constraints, such as high fees relative to other high-volume corridors. For money to move across borders, especially in the Pacific, most (but not all – e.g. Western Union) remittance service providers still need a financial institution to do that for them (most often a bank) that is a member of the SWIFT transfer system.

    The impact of regulatory issues is still uncertain, and it will be interesting to see the results of the World Bank’s G20 survey on de-risking. Regulators seem to be taking this issue seriously, with a number of global regulators and coordinating bodies issuing statements commiting to investigate the extent to which regulatory settings may be affecting the remittance services market.

    It’s great to see reimttances get some airtime on the blog – there’s a lot more we could be doing to discuss and understand this issue.


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