Avoid High transfer fees, and help fight poverty by choosing the right transfer service!

By Hinsley Njila (a princereport contributor)

Many immigrants abroad have at one point or another used Western Union or similar services to send money to their families or friends around the world. Among the good things about these services; Western Union for instance is easy to access especially in third world countries, money can be sent quite easily (online, in-person etc), money can be picked up in minutes; their logo has bright yellow and other colors.

For all you who regularly use especially Western Union, take a second to see how just picking the right services can make an even bigger difference in the lives of your families, friends, communities, and above all help reduce poverty. No one can discount the great benefits of services like Western Union; they have breached the gaps in the complexities of currency trading markets, helped immigrants connect with their communities for decades now, and in so many situations have been the only reliable source of money that has actually helped to fight the severe poverty that exists in many of these communities.

Whenever you exchange currency through Western Union per say, you are simultaneously selling your own currency and buying the foreign currency. There are two main factors that affect your money transfer costs: the exchange rate and the spread. The spread is the difference between the bid price (the price you sell at) and the ask price (the price you buy at) of a currency pair, quoted in a decimal value called pips. Basically, the lower the spread, the better the exchange rate, and the less you pay in "fees" to your broker.

Pick up your last Western Union receipt and look at the price you sold your currency to Western Union for, then go to services like oanda.com or yahoo.com, and check the rate the currency was being offered on the global forex that day and you’ll understand what I’m talking about. Western Union, which incidentally is the most used money transfer service, has the largest spread of any company. What does this mean for you, your family, friends and communities?

Well the immediate impact is that potentially millions in your local currencies are being withheld from your families and friends every time you use Western Union’s services. Money that would otherwise go to start a local business, send a kid to school or maybe just help a family put food on the table is being taken by Western Union because of reasons of excess profits. Choose a different service with a lower spread even by a few pips and you’ll get more money to your communities without actually putting more money in your transaction.

In addition to large spreads, Western Union also charges some of the highest transfer fees of anyone. If you think for a second that Western Union which has no employees of its own in these countries, no offices and therefore no operating costs besides a few percentage points paid to the banks as an outlet, it’s pretty amazing what they charge for transfers.

Several years ago when I withdrew money from Western Union at a location in Cameroon, I found that the services were NOT transparent, cost-effective, convenient or secure. The lack of transparency was due to the fact that the person dispensing the money is usually corrupt, exploitative and would often keep a few hundred of the local currency because the receiver did not know exactly how much the exchange rate was at any given time. It wasn’t cost-effective because it was certainly expensive and it wasn’t convenient or secure because people who receive money through Western Union are usually not respected at banks especially in Africa. The scene is usually a very long line, with people waiting several hours at a time, no privacy, no respect and often with a rude teller left to attend to them.

You would think a multi-billion dollar company like Western Union that has spent decades exploiting poor people in some of the most depressing conditions around the world; would do a lot to help some of these people get out of poverty, but you’d be wrong. I have NEVER heard of a Western Union scholarship in any of the poor African or South American Universities, or maybe there is a Western Union water project I missed in Zimbabwe, Nigeria, Kenya or elsewhere. At what point does social responsibility kick in for some of these companies doing business in third world countries?

Well, make the right choice by choosing the right service to send your money, and I bet these companies doing business in third world countries will have no choice but to embrace socially responsible that helps alleviate poverty. Social responsibility, accountability, and profitability should be mutually exclusive. In the fight against severe poverty like what we have in Africa, every little ‘pip’ reduction counts and could potentially mean the difference in whether someone stays hopeful or dies in poverty.