Kereni Vuai has transported many people through the pandemic.
Vuai, 27, works full time at a retirement home in Sydney, which pays him AU $ 1,500 per fortnight. She returns nearly a third of that – AU $ 400 – to family and friends in Fiji, many of whom have lost their jobs since the coronavirus wreaked economic havoc on the tourism-dependent country.
But every fortnight this support has an additional cost. Vuai also pays a $ 30 fee to send money through Western Union, which is the only way, along with the big banks, for people to send money back to most countries in the Pacific.
A supplement of AU $ 30 can go a long way in Fiji, where a typical annual salary is only AU $ 9,080.. In rural areas, 41.5% of Fijians earn less than AU $ 1,400 per year, according to the Fijian Bureau of Statistics. AU $ 30 (about FJ $ 45) could buy a week’s worth of food for a family of five.
“I am always quite disappointed and sad about the costs. It’s ridiculous. If the costs were less, I could help another family who cannot support themselves. It would make the difference to have a better life, ”she said.
Vuai is not alone. Many Pacific Island countries rely heavily on remittances. Tonga is the most remittance-dependent country in the world, with the money sent back home, mostly by Tongans working abroad, accounting for 37% of the country’s GDP last year.
But as Covid-19 shattered economies around the world, remittances have become a lifeline for the Pacific.
This was especially true in Fiji, where the tourism-dependent economy contracted by 19% in 2020 and where up to 120,000 Fijians, or 7.5% of the population, lost their jobs. When borders closed, remittances replaced tourism as the main source of income in Fiji, bringing in a record A $ 414.6 million Last year.
But shippers face huge costs, with those in the Pacific one of the highest in the world. While the global average cost of remittances is 6.38% of the sum, the Pacific average is 9.12%.
Two new players
For decades remittances to the region have been dominated by Western Union and the big banks. But that could be about to change, as two global currency exchange firms launch into Fiji.
London-based fintech company Wise, previously known as TransferWise, launched in Fiji in June while New Zealand-based OrbitRemit is expected to launch its mobile payments service in Fiji and Samoa in the coming weeks. .
Wise enables residents of Fiji to receive money from abroad through a Vodaphone mobile phone number and Vodafone’s money transfer service, M-PAiSA. Vodaphone’s share of the Fijian market is between 80% and 85%, meaning that a large part of the country now has access to Wise’s services.
Based on the market rate on July 1, for a transfer of A $ 400 from Australia to Fiji, Wise would charge a fee of A $ 14.57. This exceeds the fees set by Western Union and the big banks, but the recipient would end up with about AU $ 5 more than if sent via ANZ and AU $ 24 more than if sent via Western Union, in because of their exchange rates.
“The real cost of the transfer is hidden in the markup in the exchange rate and this is where banks and others make their money,” said Tristan Dakin, country manager for Wise in Australia and New Zealand.
New Zealand-based OrbitRemit is also expected to launch transfers to M-PAiSA wallets in Fiji, as well as Samoa Tonga, Vanuatu and PNG.
OrbitRemit said it can guarantee a fixed rate transfer fee of AU $ 4 and a 1.5% currency spread over the mid-market rate.
“We’re significantly cheaper than the other offerings,” said Tommy Heptinstall, COO of OrbitRemit. “We are offering this service at a price close to breaking even, because we want to do our part to support the communities who are going through such a difficult time because of the pandemic.”
A Western Union spokesperson said, “We are able to meet customer needs with solutions tailored to their region. For example, in geographies with heightened regulatory requirements and low availability of cash, we can deliver life-saving services to people on the ground, without compromising on safety and quality. Western Union has a long history in the Pacific Islands and a strong connection to communities. “
“Fiji is suffering”
Lower fees could be extremely helpful, says Jacob Lanyon, who set up a support network for Fijian families during the Covid outbreak called Operation Tangira.
“In the past, if you walked past a house, they would say come in, come and rest and eat, but now the hospitality has turned cold,” he said. “With a lack of funding, with dwindling sources of income, people are less welcoming to a certain extent. People in Fiji are suffering.
Operation Tangira has so far provided 50 families with enough food to last two weeks. Lanyon said more than 70% of the donations they received came from more than 200,000 Fijians living abroad, adding that it would likely be more if the associated fees were not so high.
“Some community members are reluctant to donate because of the high fees. If the fees were lowered, more money could flow to Operation Tangira, [which] results in more families able to eat, to support themselves during this period.
But Harold Dimpel, founder and CEO of mHITs, which owns the Rocket Remit mobile payment service, which also operates in the Pacific, said there was a reason the fees are so high in the region.
“The volume is low for these countries, so you can’t get the scales that you can find in other countries,” he said. “We ran a $ 0 fee campaign for many months, but we just couldn’t keep our doors open at this rate. We weren’t getting any credit back. We just carried this loss.
Dimpel added that a company even had to send cash to the islands to manage its cash flow.
“There is a lot of pressure on operator margins in this space. I know from informal conversations with central banks across the Pacific that some of the operators’ margins are very thin, if not negative, ”said Bram Peters, program director of the Pacific Financial Inclusion Program and regional director of United Nations Capital. . Development Fund.
Peters added that new competitors are welcome as this will boost competition. But Dimpel had a more pessimistic view.
“If it’s a race to the bottom, people go bankrupt and the costs just go up,” he said. “We just have to accept that there will be higher fees in countries with a smaller population, where there is less market.”