## What Explains Remittance Fees? Panel Evidence

_IMF Working Papers, April 1, 2022_

## Source details

**Canonical URL:** [What Explains Remittance Fees? Panel Evidence](https://www.imf.org/en/publications/wp/issues/2022/04/01/what-explains-remittance-fees-panel-evidence-515957)

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## Bibliographic details
- Authors: Thorsten Beck, Mathilde Janfils, Kangni R Kpodar
- Published: April 1, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400205439.001

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### Overview
- Paper uses data across 365 corridors to document time and country variation in remittance fees and to explore factors predicting variation in remittance fees.
- Documents a general reduction in remittance fees over the past decade, although the goal of fees below 3 percent has not been met yet in many corridors.
- Identifies cost- and risk-based constraints and market structure as barriers to lower remittance fees.

### Key findings
- General reduction in remittance fees over the past decade, yet the goal of fees below 3 percent remains unmet in many corridors.
- Higher transaction costs, due to a more rural population in the sending country and lower scale, are associated with higher remittance fees.
- Lower risks—linked to the stability of fixed exchange rates and Internet rather than cash payment—are associated with lower remittance fees.
- Remittance corridors dominated by banks and by few players are characterized by higher fees.

### Factors associated with remittance fees (empirical associations)
- Cost-based constraints:
  - More rural population in the sending country → higher transaction costs → higher remittance fees.
  - Lower scale of operations → higher remittance fees.
- Risk-based constraints:
  - Stability of fixed exchange rates → lower risk → lower remittance fees.
  - Internet payment (vs. cash payment) → lower risk → lower remittance fees.
- Market structure:
  - Corridors dominated by banks → higher fees.
  - Corridors with few players → higher fees.

### Policy implications / considerations
- Address cost drivers in sending countries (e.g., rural access and scale) to reduce transaction costs and remittance fees.
- Promote digital (Internet) payment channels to lower risk-related components of fees.
- Enhance competition in remittance corridors to mitigate fee premia associated with bank dominance and concentrated market structures.
- Recognize exchange rate arrangement stability (fixed exchange rates) as a factor correlated with lower remittance fees.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2022/04/01/what-explains-remittance-fees-panel-evidence-515957_