How to prevent banks from reaching deep into your pockets with international money transfers?

Transferring money abroad can be a real hassle. There are countless ways to send your money, but many of them are more costly and less simple than others. Some temporary expats will transfer money abroad using a bank, unbeknownst to them that there is an exchange rate margin cost incurred. This is somewhat justifiable due to accessibility, but it is mind-blowing just how many people are transferring significant sums of money this same way.

Banks almost always take extremely high markups of around 1.5% up to even a staggering 5% on occasion – Co-operative bank are currently charging 5% for example. This charge essentially means that Co-operative want a 5% cut of your money – you will get 5% less than the market rate. The exchange margin isn’t the only way you’re losing out, though. Traditional bank currency transfers will also charge fixed fees per transfer, for example a fixed $30 regardless of the exchange rate markup. If you are running an online business, such as selling in high volumes on Amazon to international customers, then this can rack up to thousands in lost money. Or worse, single lump sum transfers such as purchasing property abroad – there needs to be a better way.

With the modern reality of an interconnected world and a globalised, multinational business economy, there needs to be modern solutions that can surpass traditional financial intermediaries. Fortunately, there are some digital ways to transfer money that take a significantly smaller margin, and fewer if any fees. Transferwise for example operates in a similar vein, and it is no surprise that it is currently valued as Europe’s biggest startup. Such a company can focus on only one operation (currency exchange) instead of multi-department banks, whilst capitalising on the digitalisation of our economy.

Transferwise isn’t the only one, there are many – more and more are popping up because the demand is there. There are many that can match Transferwise’s services but are going under the radar with less hype – and of course a smaller PR and marketing team. The increasing competition of a niche service is allowing for ultra efficient prices that actually reflect the foreign exchange market prices. There are also ways to track these companies all in one place in order to compare the value they offer (such as expertise), ratings and services – for example with MoneyTransferComparison’s list of online platforms.

Why are digital FX transfer companies winning?

Generally, the currency transfer companies are extremely digital-focused, meaning they have extremely user-friendly and effective mobile apps, compared to some of the bug-ridden and disastrous applications like Co-operative’s recent updates. Compare this to the high-ratings from the transfer companies, and it is evident why – almost all will have a dedicated dealer that is accessible instantly by phone call for large transfers. This kind of professional yet free advice is unique in finance.

Unlike traditional banks, it is easier to see the customer experience of the specific service that you are looking to use. Many of these currency transfer companies don’t even require much (or any!) minimum amount. On second thoughts, it isn’t justifiable to send any amount using a bank.

Generally though, you can expect to get the best rates when you are transferring substantial sums of money. Expats who receive a domestic pension and small businesses are two great examples of those who are in high need to lower exchange rates. The modern transfer companies do not have to wait days until the approval of your account either, like more traditional methods.

E-commerce businesses face huge difficulties with their cash flow due to using outdated currency exchange methods. As you can imagine, it is to the same effect of having accounts receivable. Only, the customer has paid, it is just taking days to transfer through your multiple bank accounts. This is almost entirely mitigated with currency transfer companies, meaning online sellers can receive their sales in cash much faster – and of course receive an amount truer to the market amount. It should be noted though, that delivery times of transfers will differ among destinations, and not all the companies offer a fast service.

There are even fresh companies like Revolut who offer zero fees, and a free version of their service. Individuals can send money under a certain amount with no fee, but there is a monthly subscription payment instead, for those who send significant amounts, want a premium card or send payments faster. Additionally, the platform can be a place to exchange cryptocurrencies with a 1.5% fee. This variety of low-cost services available promptly on a great app is exactly the reason why they are replacing traditional banks in many areas.

Why currency transfer is becoming increasingly important

With the resignation of Theresa May and the imminent arrival of a hardline Brexiteer looking likely, the Pound as well as the Euro is going to go through some rough times. Depreciation of the pound will particularly hurt UK expats and online businesses who rely on a sufficiently strong pound. Many analysts are warning about the imminent troubles the Pound is currently walking in to.

Economic struggles in the UK has a significant knock on effect for the rest of the E.U., though. They won’t be sat smirking from afar. The Euro has been facing uncertainty in recent months from the rollercoaster of Brexit, for example against the Dollar. Uncertainty is one of the most damaging things for business and consumer confidence, of course. Efficient use of modern currency transfers will not mitigate a dire exchange rate, but they can salvage something at least. They give more power and incentive to the individual in waiting for the right time in the market, because of the speed and small margins involved.