Addressing Persistently High Transaction Costs in Remittance Corridors between Australia and Pacific Island Countries

Tameea Lock, University of Sydney, 2025 IMF & World Bank Annual Meetings

Executive Summary

Remittance transaction costs between Australia and Pacific Island countries remain among the highest globally, averaging three times the Sustainable Development Goal (SDG) 10.c target of three per cent. Since 2022, approximately 30,000 workers have participated annually in the Pacific Australia Labour Mobility (PALM) scheme, alleviating labour shortages in key industries and supporting the Australian economy. While a primary incentive for participants is the ability to send income home to support their families and communities, high transaction costs substantially reduce the value of these remittances.

This proposal recommends that the Department of Industry, Science and Resources (DISR) coordinate a competitive tender to fund an independent organisation to establish and administer a “Fair Remittances” certification trade mark. The certification, displayed as a simple logo, would be available to remittance service providers (RSPs) whose average transaction costs in each corridor fell below three per cent. Funding of $8 million AUD over two years would support the establishment, promotion, and protection of the certification, after which the scheme would be sustained through licence fees from participating RSPs.

The certification would provide consumers with a clear, easily identifiable signal of affordable services, improving awareness and fee transparency. The certification would encourage greater use of low-cost providers and stimulate competition by incentivising RSPs to reduce fees. The scheme’s success would depend on approval by the Australian Competition and Consumer Commission (ACCC), as well as participation by RSPs and recognition by consumers. Given its relatively low implementation cost and strong alignment with government priorities, the proposed policy represents a practical, short-term approach to lowering remittance transaction costs in Australia–Pacific corridors.

Problem Identification

Despite ongoing reforms, remittance costs in Australia–Pacific corridors remain persistently high. Individuals sending money from Australia to Pacific Island countries face average costs of 9.1 per cent (DFAT, 2024), compared with Australia’s overall average of 5.72 per cent (ACCC, 2024) and a global average of 6.49 per cent (World Bank, 2025). The Australian Government continues to express support for the SDG 10.c target, and, in alignment with the G20, aims to reduce transaction costs to less than three per cent and eliminate corridors with costs higher than five per cent by 2030 (DFAT, 2024). Although transaction costs have fallen modestly since 2019, progress has been slow (ACCC, 2024). The Reserve Bank of Australia has noted that significant scope remains to reduce costs across South Pacific corridors (Lowe, 2022).

The PALM scheme attracts around 30,000 people from nine Pacific Island countries to Australia each year to undertake temporary employment in rural and regional Australia. Individuals remain in Australia for between one and four years, addressing labour shortages in sectors such as agricultural and food processing (DFAT, 2024). The Australian federal government has demonstrated a clear commitment to advancing the mutual economic benefit of the PALM scheme by investing nearly $440 million AUD into its expansion (DFAT, 2025). However, high remittance fees diminish the return on this investment and may discourage individuals from participating in this program, which would be detrimental to Australia’s labour supply. 

Objective 3 of the Australia–Pacific Regional Development Partnership Plan for 2025-2029 expressly aims to foster sustainable and economic development in the region (DFAT, 2025). Reducing remittance costs would increase household income for PALM scheme participants, in turn supporting economic growth and development in the Pacific region. If high transaction costs persist, Australia risks weakening the developmental value of this PALM scheme and discouraging future participation from Pacific Island workers. It may also hinder Australia’s broader diplomatic and economic engagement at a time when strengthening Pacific partnerships remains a key national priority (DFAT, 2025).

Context

Remittances are a form of international money transfer (IMT) whereby funds are transferred between resident and non-resident individuals. In 2022, outbound remittance flows from Australia totalled $6.55 billion USD, accounting for 1.4 per cent of total global remittances (DFAT, 2023). This proposal focuses on cross-border migrant remittances, defined as money sent by migrants to individuals in their home country with whom they have familial or social ties (Sironi, Bauloz, & Emmanuel, 2019). These remittances constitute approximately two-thirds of global remittance flows (World Bank, 2024). 

Remittances are sent through formal financial institutions by RSPs or informal methods such as by carrying cash across borders (IMF, 2009). Formal transfers incur two main costs: a foreign exchange margin over the mid-market rate and a service fee that often includes correspondent banking charges (ACCC, 2024). Correspondent banks act as intermediaries, providing banking services for institutions in other countries. They may be affiliated with the sending bank or entirely independent (AUSTRAC, 2023). These relationships are essential for moving remittances efficiently and securely across borders (Davies, 2023).

Australia-Pacific Remittance Corridor Context

Remittances are a crucial source of finance for many Pacific Island economies, accounting for about 40 per cent of GDP in Tonga and 35 per cent in Samoa (World Bank, 2023; 2025). They support households in meeting essential needs such as healthcare, education, and food security. Australia is a major source of these funds; over two-thirds of remittances to Vanuatu originate in Australia (DFAT, 2024). 

The PALM Scheme is a primary driver of remittance volumes between Australia and Pacific Island nations. Participants remit an average of $1,500 AUD monthly, with long-term workers having contributed an estimated $212 million AUD to date (PALM, 2025). These flows are projected to increase as the scheme expands into the aged care sector and the new Pacific Engagement Visa creates further employment opportunities (DFAT, 2025).

Causes of High Remittance Transaction Costs

High remittance costs between Australia and Pacific Island countries are driven by structural factors, such as limited competition among RSPs and declining correspondent banking relationships, as well as by consumer behaviour (ACCC, 2024; Davies, 2023).

Most remittances are processed through Australia’s big four banks (ANZ, CBA, NAB, and Westpac), which maintain some of the highest retail margins globally (ACCC, 2019). The emergence of fintech providers, which are predominantly online or digital IMT suppliers, has reshaped the competitive dynamics of the market by offering lower fees and more efficient services (ACCC, 2024). While the big four banks appear to have responded by removing or reducing flat fees on IMT transfers, their costs remain high and their IMT volumes remain relatively steady (ACCC, 2024). 

The ability of fintechs, such as Wise Payments Ltd, to enter Pacific corridors has been limited by difficulties in establishing correspondent banking relationships (Pinczewski, 2022; World Bank, 2025). The Pacific has experienced the fastest global decline in correspondent banking, driven by high perceived financial crime risk, rising compliance costs, and low profitability (Lowe, 2023; Smith, 2024; World Bank, 2025). This “de-banking” reduces competition among RSPs and increases operational costs, which are ultimately passed on to consumers (Lowe, 2023; DFAT, 2024).

Consumer behaviour also contributes to persistently high fees. Many migrants continue using expensive channels due to habit, convenience, low financial literacy, and limited awareness of alternatives (Maeda & Suryadarma, 2024). Studies suggest Pacific Island migrants in Australia have lower financial literacy, which may limit their ability to identify low-cost RSPs and understand the full cost of transfers (Karunarathne & Gibson, 2014). The Pacific Labour Mobility Survey reveals that 47.6 per cent of Tongan households rely on over-the-counter transfers, mainly MoneyGram and Western Union, despite higher fees (Maeda & Suryadarma, 2024). Similarly, the ACCC found that 42.5 per cent of consumers do not compare costs across providers, and many continue using the big four banks instead of lower cost fintech options (ACCC, 2024). Limited awareness of available remittance options, mistrust of unfamiliar institutions, and lack of transparency in provider fees further restrict informed decision-making, allowing high-cost channels to remain dominant (World Bank, 2023; Bullock, 2025).

Current Australian Policy Landscape

Australia’s National Remittance Plan commits to reducing transaction costs in key corridors, including those linking Australia and Pacific Island countries (DFAT, 2024). Recent government efforts have focused on strengthening the financial infrastructure supporting transfers. The Pacific Banking Guarantee Bill 2025 introduces guarantees for Australian banks operating in the region (Parliament of Australia, 2025). Other measures include providing funding to strengthen protections from financial crime in the region, the Nauru–Australia Treaty under which CBA will provide services and have a physical presence in Nauru (Wong, 2024) and securing the presence of ANZ and Westpac in the Pacific (Mulino, 2025).

On the consumer side, revised ACCC guidelines encourage RSPs to provide up-front disclosure of prices along with digital price comparison tools (ACCC, 2024). The Department of Foreign Affairs and Trade (DFAT) continues to support SendMoneyPacific which allows consumers to compare the cost and speed of sending remittances from Australia to the Pacific (DFAT, 2024). While valuable, this tool adds an additional step to an already complex transaction process and may be inaccessible for some Pacific Islanders working in Australia, particularly given findings that digital literacy rates across the Pacific region remain relatively low (UNCTAD, 2022). DFAT has also funded the World Bank’s Pacific Payments and Trade Program which includes a project to improve financial literacy (DFAT, 2024).  

While addressing de-banking requires sustained collaboration between the Australian and Pacific Governments, more can be done in the short term to reduce remittance transaction costs. In particular, there is a need for a simple, accessible method that enables individuals regardless of financial or digital literacy levels to quickly identify lower cost remittance services.

Policy Options

To reduce average transaction costs in remittance corridors between Australia and Pacific Island countries in the short term, the Australian government needs to make it easier for individuals, particularly PALM workers, to identify low cost RSPs. Three key options have been considered:

Option 1: Amend ACCC Guidelines to recommend that RSPs clearly indicate whether fees meet the SDG three per cent target

This option would update the ACCC Best Practice Guidelines for Foreign Cash and International Money Transfer Services to require RSPs to disclose total transaction costs as a clearly presented percentage, and indicate whether fees fall above or below the SDG 3 per cent benchmark using colour coding or plain-language labels. The information would be displayed early in the transaction process and reflected on the SendMoneyPacific platform. While this approach is low-cost and strengthens transparency, its impact would likely be limited without strong consumer engagement. Smaller providers could face additional compliance costs, and inadequate monitoring may allow misleading conduct. ACCC evidence also suggests that disclosure alone does not significantly change behaviour among consumers with low financial literacy (ACCC, 2024). 

Option 2: The Australian Prudential Regulation Authority implement a certification trade mark available to RSPs with average transaction costs below three per cent

This option would require the Australian Prudential Regulation Authority (APRA) to exercise its powers under s 11 of the APRA Act 1998 (Cth) to apply to the ACCC for a certification trade mark under Pt 16 of the Trade Marks Act 1995 (Cth) (Trade Marks Act). The proposed certification, a logo and accompanying “Fair Remittances” phrase, would be available to RSPs whose average transaction costs in each remittance corridor remain below three per cent over the preceding 12 months. Ongoing eligibility would require providers to maintain costs below this threshold. Certified RSPs could display the logo in advertising and on the SendMoneyPacific website, providing a simple, recognisable signal for consumers, including those with limited financial or digital literacy.

While it is atypical for a statutory authority to run a certification scheme, APRA would oversee the application process, certification, and compliance. This option simplifies cost comparisons for consumers and may encourage higher-cost RSPs to reduce fees to qualify for certification. As in Option 1, uptake may be limited because participation is voluntary. Certification is also subject to ACCC approval and could be contested due to competition concerns, as eligibility is based solely on price (ACCC, 2025). Additionally, it may take time for brand recognition to develop before consumers respond to the logo and adjust their behaviour.

Option 3: Implement tender process to introduce a certification trade mark available to RSPs with average transaction costs below three per cent

This option builds on Option 2 by introducing a competitive tender process and allocating government funding to an independent organisation to establish and manage the “Fair Remittances” certification trade mark. The successful organisation would oversee implementation, promotion, certification, and compliance monitoring, reducing direct government involvement.

Funding for the first two years is expected to be around $8 million AUD, based on the recent ReMade in Australia tender process (Plibersek, 2025), though costs are likely to be lower due to fewer eligibility considerations and applicants. After this period, licence fees paid by RSPs could sustain operational costs. 

This approach retains the benefits of Option 2, while potentially increasing efficiency and reducing direct government oversight. It provides a short-term mechanism to support consumer decision-making, simplifies cost comparisons and may reduce transaction costs by influencing consumer behaviour. As with Option 2, its success depends on ACCC approval and voluntary uptake by RSPs. Allowing licence fees to cover operational costs after the initial two-year period also minimises ongoing government expenditure.

Policy Recommendation

Option 3, to introduce a government-funded tender process to establish and manage a “Fair Remittances” certification trade mark, is recommended as the most viable approach. DISR would first design the logo (such as the one pictured below) and develop the operational guidelines, including eligibility criteria and application processes.

Figure 1: Proposed Fair Remittances certification trade mark 

DISR would then conduct a competitive tender to select an independent organisation responsible for implementing, promoting, administering, and monitoring the scheme. The administering organisation would oversee certification, requiring RSPs to demonstrate that their total transaction costs, including all fees and foreign exchange margins, average below three per cent in each Australia–Pacific remittance corridor over the prior 12 months. Ongoing certification would be contingent on RSPs maintaining this threshold.

Implementation

The certification trade mark would be introduced according to a defined timeline. The selected organisation must submit an ACCC application within six months of award, detailing the certification criteria and verification process as required under s 173 of the Trade Marks Act. Following approval, the organisation would begin accepting applications within three months.

Effective implementation would require coordination between DISR, ACCC, DFAT, participating RSPs, Pacific Island governments, and migrant community organisations. To maximise brand recognition, the logo would be featured in PALM worker information packs, on the PALM website, integrated into existing financial literacy programs, and promoted through social media. The administering organisation, in partnership with the ACCC, would oversee compliance to maintain the scheme’s credibility.

Measuring Success

The scheme’s effectiveness would be evaluated over a two-year period against clearly defined market indicators. First, uptake would be measured by the proportion of RSPs operating in Australia–Pacific corridors that obtain certification; achieving 30–40 per cent participation within two years would indicate meaningful industry engagement. Second, the primary outcome measure would be a reduction in average transaction costs across Australia–Pacific corridors, using the World Bank’s Remittance Prices Worldwide data as the baseline. A measurable decline in average costs toward the three per cent SDG benchmark, including an interim reduction of at least 1–2 percentage points, would signal progress.

Consumer impact would be assessed through structured surveys of PALM workers administered upon entry to and exit from the program, establishing baseline and endline measures of logo recognition and cost awareness. A statistically significant increase in the proportion of workers who correctly identify the “Fair Remittances” logo and understand that it signifies transaction costs below three per cent would indicate improved awareness. Evidence of behavioural change would include increased traffic to certified providers via SendMoneyPacific and a higher proportion of surveyed workers reporting that they compare fees and select certified providers. These indicators would demonstrate that the certification is influencing consumer choice and contributing to downward pressure on remittance costs.

Risks

Barriers

Several factors could influence the scheme’s effectiveness. Initial uptake may be slow if high-cost RSPs choose not to participate; targeted engagement highlighting the commercial benefits of certification could help address this. Consumer recognition may also take time to develop, but integrating the logo into PALM materials and diaspora networks would increase visibility and accelerate awareness. Ensuring accurate reporting from certified providers may pose challenges; standardised templates and clear auditing requirements would support integrity. The scheme would also be contingent on ACCC approval of the trade mark and on sufficient interest from organisations to participate in the tender process.

Risks

Competition concerns could arise if certification is perceived to distort the market, but early consultation with the ACCC, transparent criteria, and non-discriminatory access would help mitigate these risks. Structural challenges, including de-banking and high regulatory compliance costs will persist regardless of certification and would require ongoing government support. Additionally, some RSPs may temporarily reduce fees to qualify for certification and subsequently raise them; annual re-certification and ongoing monitoring would discourage this behaviour and protect the scheme’s credibility.

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