Why are remittance fees still so high for Caribbean families abroad?

Caribbean remittance corridors are among the most expensive in the world by global benchmarks. The World Bank’s standard measure — the cost of sending USD 200 — repeatedly shows Caribbean corridors above the global average, often well above. For Jamaica, Haiti, and Guyana, remittances represent a meaningful share of GDP and a central pillar of household income. Yet fees that should logically have compressed as digital payments scaled have remained sticky. There are several reasons.

The first is corridor concentration. A small number of money transfer operators — Western Union, MoneyGram, Ria, and a few digital challengers — dominate most Caribbean corridors. Their pricing power reflects limited effective competition. New entrants face high regulatory costs, correspondent banking access has become harder, and the volumes in individual island markets are too small to attract aggressive price competition.

The second is correspondent banking de-risking. Since the 2010s, major global banks have been progressively withdrawing correspondent banking relationships from smaller Caribbean banks. The cited reasons include anti-money-laundering compliance costs, terrorist financing risk assessments, and unfavourable economics for serving small markets. Each correspondent relationship that closes makes remittance routing more complex, more expensive, and more dependent on the few providers that have managed to maintain access. Households pay for that complexity in the form of higher fees and worse exchange rates.

The third is exchange rate margin. The headline transfer fee is often only part of the actual cost. The exchange rate offered by the transfer provider routinely differs from the mid-market rate, and the spread between the two is a real revenue stream for the operator. A transfer with a low headline fee but a wide exchange rate margin can cost more than a transfer with a higher fee but a tighter rate. Most consumers do not have the tools or the visibility to compare on a like-for-like basis.

The fourth is regulatory and compliance load. Cross-border remittance is one of the most heavily regulated financial activities in the world. Operators must verify sender and recipient identities, run sanctions screening, report transactions over specified thresholds, retain records, and submit to audits in multiple jurisdictions. Those costs are real, they are passed through to consumers, and they fall disproportionately on the smaller corridors where they cannot be spread across high volumes.

The fifth is the slow pace of digital substitution. Mobile money has transformed remittance economics in parts of Africa and Asia. The Caribbean has been slower to develop equivalent infrastructure. Mobile wallets exist, fintech operators have entered the market — Wise, Remitly, and Sendwave among others — and their fees are typically lower than legacy operators. But adoption is uneven, recipient-side cash-out remains expensive, and trust in newer providers is still building among diaspora users who have been wiring through Western Union for decades.

Fees are moving. They are not moving fast.