Are you sending money from USA to Philippines? Want to get the most pesos for your dollars or receive most dollars in Philippines? Not sure which provider is the best, cheapest or fastest? Should your funds be received in pesos or dollars? YOU came to the right place! We will cover all most important topics:
Money Transfer to Philippines: current state and key trends
Pesos to dollar exchange rates and timing
Top money transfer providers
Receiving money transfer in pesos or dollars
Sending larger money transfer amounts
Choosing the best receiving method
Finding the best way to send money
Please note this post is specific to Philippines. If you are looking for general knowledge of how to best send money, please review this other SaveOnSend blog post first.
Before we get started… Great news if you are a consumer sending money from USA to Philippines: it is currently one of the most competitive corridors from USA, attracting more providers and larger investments than many other destinations. You are in luck with variety of choices and lavish promotions which don’t exist for some other destinations. So you could make a relatively safe assumption that when transferring money to Philippines with any top provider, you will get a reasonable price and service. Overall, cost of sending money has been declining worldwide, with providers’ margins dropping 30% just in the last decade:
But we are recommending trying providers with the cheapest price – this way, you are helping not just yourself but also supporting Philippines’ growth. By always using the least expensive method of sending money home, each 1% in savings generates additional $100MM annually for your families and Philippines’ economy.
1. Money Transfer to Philippines: current state and key trends
According to Pew Research, Philippines is the world’s #3 destination for receiving money after India and China. This position could be in part explained by Philippines being probably the only country in the world that has institutionalized the deployment of its people to work overseas since 1995. Filipinos migrants’ top occupation is seafarers, representing 20% of all remittances. Remittances from OFWs to Philippines account for 8.5% of GDP. Remittances are so important to the economy of Philippines that in October 2017 the government created a bank for OFWs to compete for remittances with private banks and money transfer specialists. The rapid growth in remittances continued through 2017:
Out of all countries from where OFWs-Filipinos send money to Philippines USA is by far #1:
There are 3+ million Filipinos in USA, with around 40+% living in California and another 10% in Hawaii. 35% of USA Filipinos live just in 3 metropolitan areas: Los Angeles, San Francisco, and New York City.
In comparison with other migrant groups in USA, Pinoys tend to have an average level of education but earn a higher income (see the chart below). This might be in part due to a higher portion of Filipinos employed as nurses and personal care workers.
Filipinos send money from USA using both an online channel (a provider’s website or mobile app) and via a cash agent. Since many Filipinos get paid in cash they prefer to sending cash transfers to Philippines as well. This way they avoid depositing money into a bank account and potentially facing a tax liability. Transfers are received either in pesos or dollars, depending on the preferences, exchange rates, and other factors (more on this later). Of all transfers being sent digitally 75+% are received via cash agents in Philippines.
If you are reading this and haven’t yet tried sending money to Philippines online, via a website or mobile, you should definitely give it a shot. Most of well-known providers have such tools, and the setup shall only take few minutes. Once you link your bank account or debit card, you might be surprised how easy to send money online and how much you could save. This way, all your past transfers are available for your review any time, plus your future repeat transfers shall take less than a minute to complete since you don’t have to enter the same information again. There are also significant cost advantages (more on this later).
2. Pesos to dollar exchange rates and timing
Are you wondering if you shall wait for pesos to increase in value or for a dollar to fall? Trying to time the best exchange rate is unbelievably difficult if not impossible. If anybody gives you an advise on this topic while not making millions trading on same information, it might be a sign that you shouldn’t follow such recommendation. Still not convinced? Look at the graph below for changes in the exchange rate of pesos to dollar during the last 10 years – do you see any logic in the exchange rate’s short- or long-term movements? While the recent trend is of peso depreciating vs. the US dollar, you can notice long periods when exchange rate decreased or was stagnant:
However, there is a more practical approach to timing money transfers – based on the analysis of FX markup (the difference between a pesos-dollar exchange rate that providers get on the market vs. an exchange rate that you get from a provider). Not only each money transmitter applies a very different FX markup, it also makes daily changes to its FX markup to maximize profits. Some providers are even applying different FX markups for different sending-receiving methods. For example, for sending money from USA to Philippines, MoneyGram has different peso-dollar exchange rates for sending a) online-to-bank, b) other sending-receiving methods; or Wells Fargo has different exchange rates for sending a) $25-250, b) $251-1,000, c) $1,001-2,000, d) $2,001-3,000. So how do we use this knowledge against money transmitters?
Look at this chart showing fluctuations in FX markups across remittance providers for USA-to-Philippines:
Despite everything we read about so-called “disruption” in remittances, FX markup has been overall stable across providers. Western Union had been gradually increasing FX markup during 2015 and 2016 but then cut in half in early August of 2016. One of the world’s largest money transfer providers, Ria Money Transfer, significantly increased its FX markup during the summer of 2015 and has pushed it even higher since then.
Such swings are, unfortunately, too common among providers and not just when sending money to Philippines:
It means consumers cannot trust its favorite provider to apply a consistent price and must compare prices across providers with tools like SaveOnSend.com before each transfer. One particular exception is TransferWise which makes all money on charging fees without any FX markup (in the previous graphs, did you notice one line consistently near 0% axis?). The way you could take advantage of this is to compare your favorite provider’s FX markup to its average in the previous few months based on SaveOnSend charts. If FX markup is at or below the average trend, you could proceed with sending money; otherwise, it might make sense to wait 1-2 weeks till your provider’s FX markup comes down to its average level.
Why do providers increase their margins? Shouldn’t more competition drive lower prices? In theory – yes, but only if consumers care about it. Fortunately for providers, Filipinos are known for their loyalty and are not as price-sensitive as other nationalities. For example, compare previous charts with what the same providers are charging Chinese and Indian migrants in USA:
As you could see, Filipinos are being charged 1-2% more by the same providers. Being loyal does not pay…
3. Top money transfer providers
In otherwise competitive field, there are 2 key providers for USA-to-Philippines remittance corridor. Xoom leads among consumers sending money to Philippines online and Western Union among those who transfer money via cash agents. About 1/3rd of Xoom’s revenues comes from money sent from USA to Philippines, and this provider is known for almost instant money transfer and good customer tools and support. Western Union, on the other hand, is known for the largest network of cash agents worldwide, but takes longer to deliver funds (more on pricing comparison later).
4. Receiving money transfers in pesos vs. dollars
Two tables below are for sending the same amount, $500, between linked bank accounts – first table is for receiving transfers in pesos, second is in dollars. As you could see, the same providers are charging less for receiving in dollars. It works like this because providers don’t lose money on the spread of buying and selling pesos and could pass those savings onto you. Therefore, if your receiving party in Philippines doesn’t need to convert dollars into pesos, send them dollars:
5. Sending larger money transfer amounts
Let’s now review how much we could save by sending larger amounts. Compare margins in the previous tables for sending $500 with the ones below for sending $2,999: