Cash can travels without excess baggage

Since last month the market has seen the entry of John Lewis with a low-cost service, and a 'world money transfer day' highlighting the profits made at the expense of migrant workers sending vital cash home to developing countries.

John Lewis is the first high street retailer outside the Post Office to offer an international payments service with "competitive rates, quality customer service and transparency of charges".

It says high street banks can charge fees of between £10 and £40 regardless of the amount transferred and an exchange rate of up to four per cent. The retailer, through currency specialist HiFX, charges a transfer fee of £9 for transactions under £3,000, and no fees for higher amounts above this. There is also no maximum on the amount that can be transferred.

John Lewis International Payments will also refund any foreign bank receiving fees incurred by customers. "This commitment makes the John Lewis service unique in the market and could save customers even more money when transferring funds abroad," it says.

While the retailer's strategy is to offer customers help in managing their finances overseas, adding to travel insurance and foreign exchange, currency firms and online exchange services have sprung up to undercut traditional services.

Andrew Hagger at moneycomms.co.uk said: "It has been reported previously that up to 90 per cent of transactions are still conducted through the banks, so there is a huge amount of money to be saved if only consumers took advantage of deals from some of the specialist breed of online brokers such as FairFX, Caxton FX , HiFX and Moneycorp."

In a report for FairFX comparing those four with the Post Office, Western Union, and seven banks (including Nationwide), Moneycomms found a gap of £53 between cheapest and most expensive providers on a £1100 transfer.

The cost of transferring 1200 euros to Spain was cheapest at FairFX and Caxton FX, which levy no fees. The Post Office, also fee-free, offered the worst exchange rate, putting its total cost behind HSBC and RBS, but still £10 lower than Barclays and Western Union and £14 below Santander. FairFX was £40 cheaper than Santander, which like Nationwide charges a fee of £25.

Western Union was competitive for payments to the US and Australia, but very uncompetitive for Swiss, Polish or Czech transfers.

The fees levied by the banks generally far outweighed their often competitive exchange rates.

The World Bank estimates that money transfers from developed countries are worth a staggering $450billion a year to the developing world, supporting the welfare of an estimated 700 million people.

Challenger online service Azimo enables users to send money online from across the UK and EU to almost 200 countries, with transfer fees starting at £1.

Founder Michael Kent says: "Azimo is a business founded by migrants for migrants, so we understand the problems that high fees and poor customer service bring. The benefit of alternative and particularly online money transfer services is that it's super easy, low-cost, fast and secure.

"As an industry, it's time that money transfer businesses come together and helped our customers understand that there are alternatives to the likes of Western Union and MoneyGram who are just out there to line their own pockets. "

Former Labour minister Tessa Jowell, who co-organised the world money transfer day, said migrants "work hard, support our economy, and keep our city moving and our hospitals open". She added: "They should not be exploited when sending money abroad to support their families or friends - the transfer tax rip-off must stop."

Azimo's research found customers believing that 2.4 per cent is a 'fair' fee to charge for a money transfer, and 85per cent unwilling to pay more than £4.

It says: "However, global corporations such as Western Union, MoneyGram and high street banks who dominate the industry, currently charge on average 8-10 per cent on money transfers and in some corridors over 20 per cent."

The most popular methods of sending money overseas are through a bank (31 per cent), a high street money transfer provider (14 per cent) and online (19 per cent). Amongst under-34s banks remained the most popular method (36 per cent), followed by online (26 per cent), with 8 per cent using their mobile.

Yet over half of the under-34s still use banks or the high street with 26 per cent going online, and 8 per cent using their mobile phone.

Family support remains the number one reason for customer sending money (over 70 per cent). Other notable reasons were education, up from 3 per cent in to 8 per cent in 2014 and charitable donations, which rose from 2 per cent to 5 per cent.

The Moneycomms survey did not include person-to-person currency exchange providers like TransferWise and CurrencyFair, which also claim to offer the cheapest services. CurrencyFair says that for any amount over £2000, it is the only platform that can match or beat the interbank rate, "which banks, brokers and other transfer services can't do".