Why and how can ethnic Filipino stores and small remittance companies charge low remitttance fees per transaction, compared to Western Union and Canadian banks, for sending money to Philippines? Is it safe to do online money transfer from Canada to Philipines through the remittance companies, non-banks, not Western Union?|||My previous post (different pen name) did not fully answer why and how ethnic Filipino stores and small (compared to big banks) remittance companies can charge low remittance fees. To my knowledge, based on my previous experience working with banks in the Philippines for many years (before immigrating to Canada), businessmen can get high exchange rates if big amounts are involved when converting dollars to pesos. Therefore, by pooling the dollars sent by remitters from Canada, the Canadian remittance company can realize a foreign currency exchange gain, on top of the remittance fee charged to the senders.
However, if the exchange rate dropped compared to the rate committed to the senders, to avoid FX losses, the remittance company may delay converting dollars into pesos, and therefore delay the delivery of funds to the beneficiaries in Philippines. I found out that not all tie-ups of a Philippine bank operate in the same manner. Before I wired my own settlement funds to the Philippines, using the Canadian banking system, I first tried sending my pre-funding through another tie-up of the same bank I tied-up with. Since we both can use the same bank's remittance software and system, I assumed my money to be in my settlement account within minutes of the tie-up accepting my money. The problem was, this other tie-up quoted me a higher exchange rate than the bank itself would convert for us that day. The selling point of this other tie-up is, they offer the highest exchange rate among Filipino-Canadian remittance companies
I didn't believe they would sacrifice their own profits, or operate at a loss by processing my remittance on the same day or hour that they were offering a higher exchange rate than our common tie-up bank. It took about a week before my settlement account in the Philippines was credited with my remittance, probably after the Canadian company was in a position to realize FX gain at the time of posting to my settlement account, in our common "partner bank."
Since that time, I always used the Canadian bank charging me $30 front-end per transfer (+$8 by the Philippine bank), but I didn't have to worry the tie-up bank in the Philippines would refuse to honor my payment orders, to credit my Canadian customers'/beneficiaries' accounts within minutes of my instructions sent to the bank in Philippines. My company does not gain/lose through currency speculation/trading, I quote to my customers the same bank rate emailed to me daily from the Philippines. It is frequently but not always lower than another tie-up's "highest rate." As I write, the bank rate is 44.78 PHP:$1, the tie-up which claims the best rate is 44.70/$.
In summary, non-bank remittance companies can offer their services for lower service charges compared to the big banks or Western Union, because (1) they have lower overhead than banks or Western, and (2) they can top up their remittance fees with foreign exchange gains -- may be, not always, at the expense of beneficiaries waiting a bit longer for the proceeds. Not within minutes of the remittance being received in Canada and encoded in the system. To be fair, that wait is reasonable, in view of low remittance fee/higher exchange rate. Some tie-ups, including myself, may offer the best of both worlds: good exchange rate (not always the highest, sometimes the highest) and posting within minutes -- if beneficiary's account is with the tie-up bank. May be a day or two if credit to accounts maintained in other banks. And yes, it's safe to remit online!|||I remitted to the Philippines, for credit to my bank account. The Canadian bank charged $30 (their front-end charge) plus $40 (they said the latter amount was for the Philippine bank, so that bank will no longer deduct from the amount of remittance a back-end charge, something like that). The amount remitted was not that big; the bigger the amount of remittance from Canada to the Philippines, indications were that the total charge would exceed $70. I asked the bank why they cannot lower their charges closer to what the smaller remittance companies charge, to get a bigger slice of the market? The answer was, "We charge what we charge. Regardless, customers will come to us. We will not reduce our charges to get more customers." I don't think the answer was arrogant. It may actually be a good thing for the smaller non-bank remittance companies, that big banks are NOT trying to ease the small companies out of business by competing on price. The smaller companies will be out of business if the big banks charged as low for their services. On the other hand, by charging more, the banks are able to maintain their profitability/trxn.
Is it safe to transact with the smaller companies? More specifically, to transact online with the smaller companies? It depends. I must admit I have a vested interest, the way I will answer this question: If you deal with Canadian tie-ups of Philippine banks, I would say it's safe. Philippine banks are very selective in accrediting tie-up companies. I operate myself one tie-up company of a Philippine bank which three years in a row brought in the most inward remittances to Philippines from Filipinos abroad, earning a Hall of Fame Award, from the central bank of the Philippines. That bank has other tie-ups in Canada and other countries, but I cannot list the tie-ups' company names or web sites. To do so will be like advertising in this forum and may violate the rules. However, if you wish a personal answer outside Yahoo! Answers, you can email me at bpinoy@bell.net (I asked my tie-up bank if I could use that email address, they allowed me to, provided I am clear the email address is not owned by the bank, but by my company).
By the way, I told the Canadian bank I did not want to pay the $40 for their Philippine correspondent bank; just paid $30 Canadian bank charge. The Phiilippine bank did deduct their "back-end" charge from the amount remitted for credit to my account; they charged $8 not $40. So my total cost was $38. My customers from across Canada send me their money thru Interac. My company charges $10 per transaction averaging $500 (and if the remittance proceeds would be credited to an account maintained with my tie-up bank). My tie-up bank's share is less than half (I keep more of the $10 per transaction, but as I mentioned I pay $38 for the "wholesale remittance" wiring to the Philippines the aggregate of my customers' remittances. If I didn't wire my customers' retail transactions (actually, pre-fund the transactions), my tie-up bank will not implement my payment orders to Philippine beneficiaries. In my case, because of pre-funding and continuing replenishment of the settlement account, credits to beneiciaries' accounts are effected within minutes of my instruction to them. May take a day or two, if beneficiaries accounts are maintained at other banks, and charge is $12 for amount under $1000.
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