FinTech money transfer companies have dramatically changed the way we move money from one country to another. The traditional model which espouses banks as the de facto money transmission mechanism is quickly losing favour with clients around the world. For starters, banks and institutional financial organizations eat into more of every $1 sent abroad than any other money transfer company.
Banks are in the business of maximizing profits, and they do this by levying high rates, fees, commissions and charges on Forex transactions. The incoming and outgoing wire fees (international and domestic) are but a small component of the fees that customers can expect from their banks. The proverbial fly in the ointment is the spread – the difference between the bid and ask price for currencies.
With banks, these figures can be several percentage points, meaning that large money transfers are subject to significant deductions. The online money transfer rates offered by banks are hardly ever the true cost of sending money abroad. When you’re shopping around to transfer money overseas, experts suggest that finding the cheapest route through an online aggregator platform is your best bet. These objective review sites evaluate the pros and cons of each company for you.
What about Money Gram and Western Union?
MoneyGram features 30,000+ locations around the United States, with what it deems ‘fast and reliable’ services to clients. This online money transfer service and land-based money transfer service offers convenience to clients, and money transfers that arrive within minutes. Of course, the money transfers are subject to the operating hours of agents in the receiver’s country, and the regulatory frameworks in place.
The process of sending money requires choosing a receiver, selecting how the payment is made (bank accounts, debit cards and credit cards), and then sending the money online. In-person transfers are also available, as are bank account transfers, mobile wallets and the option to send money to inmates. As for fees – the most important component of MoneyGram’s services – you can expect fees to be capped at a flat rate of $11.50 on transfers of $50 – $900 within the US. Any amounts greater than $900 a subject to 2% additional fees.
Western Union is possibly the world’s most established, popular, and globally operational money transfer company. Western Union is particularly useful in countries with large unbanked populations, such as throughout Latin America, Africa and Asia. Currently, Western Union sports 400,000+ global locations, and money transfers can be concluded over the phone, online, or at a Western Union money transfer center. However, the fees associated with Western Union payments are dependent upon the method of delivery, the country of delivery, and the speed with which it is requested. The uncertainties in costs related to Western Union are largely attributed to the FX rates in question.
According to various reviews, Western Union fees for transfers from the US to Mexico could cost $28 for 3-day delivery service, and $40 for an immediate delivery. With bank to bank transfers, you’re looking at $5, or $25 when debit cards and credit cards are used for payments transfers into bank accounts. However, these money transfer services are best applied to online payments transfers. Be advised that mobile payments via debit card or credit card are subject to high fees. For domestic purposes, Western Union and Money Gram will do the trick, but it’s in the global payments arena that these payment systems completely fall apart.
Fintech Disruptors: Transferwise and World Remit
Transferwise is one of the most highly rated money transfer services in the world. It came to prominence in the years following the global financial crisis and was founded in 2011. It has won multiple awards from various authorities over the years. These include the Best Online Platform and App for 2017. It is fully authorized to serve as an international money transfer company, courtesy of the Financial Conduct Authority (FCA). Among the many benefits of using Transferwise are complete transparency, client onboarding, low rates, and multi-currency operations.
There are presently 38+ currencies accepted by Transferwise. The minimum transfer amount in the United Kingdom is £1, and the minimum transfer amount in Australia, the US, and Canada is $1. All trading activity takes place through 4 channels: email, mobile application, chat functionality, and the online platform. The rates levied on transfers with this company are extremely low, and fees are 0 within the UK, previously £2 fall transfers under £200.
Other destinations may be subject to a £10 fee. However, the exchange rate fees are typically 1% or less, except for countries like Colombia 2.5%, China 1.5%, and Brazil 2%. Transferwise blows PayPal away in terms of the real exchange rate and what you receive in AUD, AED, CAD, CHF, EUR and other currencies. There are many other FinTech companies currently disrupting the financial landscape, including World First, Moneycorp, OFX, Currencies Direct and others. They all do something that banks do not: they offer transparency, low rates, and elimination of intermediary fees and recipient bank fees. These present significant cost savings for clients.