Exchange rate margins explained

What the margin is

A remittance has two price parts. One is the fee the provider quotes. The other is the exchange rate margin ⁴. The World Bank says an important portion of the remittance cost is the exchange rate spread, which is not quoted in the transfer fee ³.

The UN metadata for indicator 10.c.1 defines the total cost to the sender as the fees plus the margin by which the exchange rate charged is above the current interbank exchange rate ¹. The metadata gives no named source for the interbank rate ¹.

How total cost is measured

The World Bank Remittance Prices Worldwide (RPW) database collects the total cost of each service split into the transfer fee and the foreign exchange margin ⁴. Researchers gather prices by posing as customers and contacting firms in each corridor ³.

RPW prices each corridor for the local equivalent of US$200 and of US$500. These amounts were set in 2008 and adjusted for exchange rate changes ³. The SDG indicator uses US$200 ¹. The average cost is the simple average of the total costs quoted by each provider in a corridor ¹.

The World Bank publishes a second measure, SmaRT. It is the simple average of the three cheapest services for sending US$200 in a corridor that meet criteria such as transparency and a transfer speed of five days or less ¹.

Fee and margin side by side

These RPW figures for Q3 2025 show how the split between fee and margin varies ^5,67. A service with no fee can cost more than one with a fee, once the margin is counted ⁵.

What the measure leaves out

• The World Bank says fees and taxes charged by the receiving country or organization may not be tracked ³.
• Exchange rate costs may be missing where remittances are paid in dollars or where rate information was not provided ³.
• The RPW report says changes in the cost of sending through mobile operators since 2021 have largely been due to changes in the average foreign exchange margin ⁴.

Rules that show the rate to senders

In the United States, Regulation E requires a remittance provider to give the sender a disclosure before payment. It must show the transfer amount, fees and taxes, the exchange rate used and the amount the recipient will receive ⁸. The receipt must repeat these items and add the date the funds will be available ⁸.

In Ghana, Bank of Ghana guidelines fix the conversion rate for inward remittances at the average opening Bloomberg USDGHS regional bid-ask range on the day the funds are received, or as the Bank prescribes ⁹.

The SDG 10.c target

Target 10.c reads: by 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent ².

The World Bank report says the UN SDGs and the G20 set a 3 percent target for the global average by 2030 ⁴. The same report refers in its overview to a G20 commitment to reduce the global average to 5 percent ⁴.