Monde: French consumer association files suit against Western Union and MoneyGram

UFC-Que Choisir has announced that it has filed a lawsuit against Western Union and MoneyGram for "deceptive marketing practices," pointing to weak competition in international money transfers and high tariffs, which vary from country.

The French consumer association UFC-Que Choisir published on November 27 a study devoted to international money transfers. "It is commonly about sending between relatives (residents of foreign origin, parents sending money to children students abroad, etc.) for one-time or recurring operations," she notes in his analysis.

The organization claims it has filed a lawsuit against Western Union and MoneyGram for "deceptive marketing practices" and calls on the government to "create the conditions for healthy competition." "Neither Western Union nor MoneyGram is clearly telling their customers how to charge foreign exchange fees," says UFC-Que Choisir. In total, the exchange fees of the transfer companies are 2.5% higher than for the online companies, and even 7 times more than the exchange fees charged by the banks.

On these costs, the association makes the finding of an "anesthesia" of the competition, testifies a disparity of the tariffs practiced: for Tunisia, these vary according to an amplitude of 34%, costing the maximum 11,40 euros for a transfer of 170 euros at Ria, against 8.50 euros at MoneyGram.

10.3 billion transferred outside the euro area

The association explains it. Of the 19 billion euros that are sent each year from French territory to abroad, 10.2 billion euros are transferred to a country outside the euro area. "Nearly half of this volume (52%) is sent to the Middle East and North Africa (Morocco, Algeria, Tunisia and Turkey). 1.9 billion euros (19%) are sent to the Asia-Pacific zone (Vietnam, China and India) while 1.5 billion are sent to sub-Saharan Africa (Senegal and Cameroon), or 15%. "

In France, money transfers abroad (excluding the euro zone) of individuals cost on average 6.7% of the amount sent. The consumer pays for a fee-for-service fee, "which is the price of the foreign receipt, processing and payment services", and exchange fees, "which come from the difference between the conversion rate applied by the provider and the market rate, "says the study.

The more expensive traditional transfer companies

Traditional transfer companies (Western Union, MoneyGram, Ria, etc.) charge a fee of 7.3% of the amount sent. "The cost of this service is up to 12.4% as part of La Banque Post's partnership with Western Union".

New online players (TransferWise, WorldRemit) are cheaper at 2.6% on average, but services are more limited. These transfers can also be made via banks, which charge 6.9% of the amount sent on average, or the services of La Poste, which gives itself 5% of the sums transferred.

Behind this average cost hides great disparities, varying from single to double depending on the destination. Thus, "a transfer of 179 euros made to Morocco costs 8.30 euros, or 4.9% of the sum sent"; "The same amount transferred to Algeria is invoiced 16,20 euros, or 9.5% of the amount," the report notes. In total, the transfer fares to Algeria are 64% more expensive than the average transfer fee from France.

"For the eight main transfer destinations, French fares are on average 14% more expensive than those of our European neighbors," says the association. "The most exorbitant tariffs are found in Algeria (+ 11%), Morocco (+ 17%), India (+ 22%) and Vietnam (+ 25%). "

No relationship between volumes transferred and the price of transfers

For the consumer organization, "serious market failures account for these price excesses". While several studies by the World Bank document an inverse relationship between remittance rates and volumes traded between the two countries, this dynamic is not at work in France.

Thus, "the cost of a transfer of cash-to-cash funds to Algeria (the second zone of destination) reaches 9.4% of the sum sent". "Conversely, the cost of transfers to Côte d'Ivoire (the fifteenth country in terms of volumes sent) is only 5.5% of the amount sent. "

Conclusion of the association: "Competition does not benefit consumers in the money transfer market". In particular, "the difficulty for consumers to assess the total cost of money transfers".

Exchange fees are not very transparent

UFC-Que pick tip especially the exchange fees. For the sixteen main destinations, these represent, on a weighted average basis, 26% of the total billing of the transfer charges made by consumers. "These fees are up to 42% of the billing of a transfer to Tunisia but are not charged for destinations that have the CFA franc," says the study.

The players in the money transfer market abroad do not use the same practices when it comes to informing consumers of the amounts of exchange fees charged to them. As a result, nearly 15% of companies do not provide billing information, according to the World Bank.

With Jeune Afrique