Shift to Digital: How UAE's New Remittance Fee Structure Promotes Mobile Transactions

The UAE has made a significant move by increasing remittance fees for the first time in five years, impacting residents who will now face an additional 15 per cent fee, approximately Dh2.5, on transactions at physical currency exchange houses. This change, initially expected in early April, saw widespread adoption by late April and early May.

The Foreign Exchange Remittance Group (FERG) announced in February 2024 that exchange houses in the UAE could optionally adjust fees for services at physical branches. However, transactions via mobile applications are likely to remain unchanged or may even see a decrease to remain competitive in the digital arena.

Joyalukkas Exchange, a reputed exchange house in the UAE, encourages a digital shift via its mobile applications with the most competitive and convenient foreign currency exchange rates, consistently favourable rates in a wide range of currencies, and a seamless money exchange experience.

Antony Jos, Director of Joyalukkas Exchange, commented on the adjustment, stating, "The 15% hike ensures that we can sustain high-quality services and meet new regulatory and operational costs, unchanged for the past five years. This encourages us to promote our Mobile Application, which saves time and provides excellent service like our physical outlets."

UAE Digital Remittance Market Growth

The UAE's Digital Remittances market is expected to hit US$7.52bn in 2024, with a steady growth rate of 3.08%, reaching a total of US$8.49bn by 2028. Additionally, the number of users in this sector is projected to reach 1.38 million by 2028, with an average transaction value per user anticipated to be US$5.96k in 2024.

India, a major recipient of remittances, saw a 12.3% increase in inward remittances in 2023, reaching $125 billion (Dh450 billion), with the UAE contributing 18% of this inflow. A significant boost came from the bilateral agreement between the UAE and India in February 2023, promoting local currency use for cross-border transactions and linking payment and messaging systems, as highlighted in the World Bank's Migration and Development Brief.

The World Bank's brief also pointed out that while the global average cost of sending money stands at 6%, the UAE offers a lower average of 2.9%, showcasing its significant position in the global remittance scene as the second-largest in personal outward remittances after the United States. Remarkably, the UAE surpasses global trends with an estimated 11% of remittances sent via digital channels, reflecting the nation's adoption of digital technology in financial services.

With $39.6 billion in financial transfers in 2022, accounting for about 7% of the GDP of the countries, the UAE is a major contributor in the region. The report further indicates a growing demand for reliable, cost-effective money transfer services, driven by the increasing number of expatriates from countries like India, Pakistan, Bangladesh, Egypt, Nepal, Sri Lanka and the Philippines.

This transition towards digital remittances, supported by strategic bilateral agreements and the integration of advanced technologies, not only mirrors the changing dynamics of global remittance flows but also highlights the UAE's dedication to maintaining its competitive edge in the financial services sector. The shift encourages a more digital-forward approach in handling remittances, aligning with global trends towards efficiency and convenience.