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*This post may include affiliate links. We get a commission if you sign up with a partner; this commission is at no cost to you.(Last Updated On: December 17, 2019)
Ever move money abroad, only to get LESS than you thought you would?
Many compare that number to their bank’s price, and then, most do NOTHING about it. A decade ago, we’d understand your apathy, as few alternative options existed back then. Fast forward to the present, though, and the non-bank money transfer industry is booming.
Know that you no longer have to take these abysmal rates lying down. These days, international money transfer apps like XE make it easy to know the REAL rate of exchange.
In today’s article, we’ll outline – in painful detail – how badly you’re getting robbed. Then, we’ll show you all the options you have at your disposal.
The banks still act like it’s 1992
As finance observers, we’re astonished at the arrogance displayed by the banks. The money transfer industry has undergone seismic shifts over the past decade. And yet, they’ve barely changed their pricing structures.
While money transfer has made quantum leaps since 2010, old habits die hard. Bankers know their best customers are Boomers, who tend to view new technologies with skepticism. Eventually, the banks will have to adapt to the new money transfer paradigm – a digital marketplace where competition is cutthroat.
The future is now here – there are literally no good reasons to move currency through your bank anymore. Want to see how terrible the disparity is between the banks and their online competition? Let’s put your bank up against Transferwise.
For the sake of argument, let’s say you want to buy a depreciated rental home in the UK, post-Brexit. To close the sale, you need to move 40,000 GBP. Your financial institution starts by charging a 35 USD wire fee. Then, they offer a USD/GBP rate of 0.7412. To come up with 40,000 GBP, you’d need to move 54,022 USD, wire fee included.
What about Transferwise? Rather than pay a USD/GBP rate of 0.7412, you’d get 0.7602 – the interbank rate. To make money on transfers, Transferwise instead charges a small 0.44% fee. Even after paying a “hefty” 233.81 USD fee, you’d only have to move 52,850 USD – that’s 1,150 USD less than your bank!
Why do fat cat bankers deserve 1,150 USD for clicking a few buttons? They don’t – they’ve always gotten away with it, so they quote whatever price they desire. Fortunately, you no longer have to grease their palms. Below, we’ll showcase money transfer apps that are cheaper, quicker, and easier to use!
Which money transfer apps are the best of the bunch?
The money transfer industry has evolved rapidly. So much so, that it’s gotten difficult to pick clear winners. Already, to survive, various money transfer services have targeted multiple niches.
It’s hard to crown a specific operator as the best overall option. That depends greatly on your situation. As such, we’ve highlighted several options that cover most bases.
Best all-around app: Transferwise
Yeah, we know – we just finished panning the idea of silver bullet solutions. However, if you transfer money infrequently AND want a great rate, it’s hard to beat Transferwise.
After all, they’ve become the poster child of the money transfer industry. In 2018, they transferred over 5.2 billion USD per month – only Western Union moved more cash. Eight years earlier, they had an impossible dream – to make money transfer MUCH cheaper for everyday people.
Transferwise proposed charging customers the interbank rate – all while charging a small transfer fee. Fortunately for them – and us – the concept caught on like wildfire. Soon, they had the scale needed to grow their operations massively.
When you use Transferwise, they show all fees UPFRONT. From the exchange rate (always the interbank rate) to the fees they charge, nothing is hidden. They even compare themselves against their competition – even when they aren’t the cheapest option.
Combine that with their easy-to-use platform, and you have a service that will work well for most people.
Best for SMEs: OFX
While Transferwise offers some of the best rates in the industry, its service targets consumers. SMEs, or small to medium enterprises, have more robust money transfer needs.
These operations pay contractors, factories, and suppliers regularly. Often, this means that they send many THOUSANDS of dollars abroad, every single month. To keep things moving smoothly, you need a partner that understands business.
In our mind, OFX is that service. In business since the late 90s, they’ve served SMEs in Australia long before mobile apps were a thing. Today, they operate worldwide, offering a suite of tools that make moving money internationally cheap and quick.
OFX gets money to suppliers faster than other money transfer services. They let you pay up to 500 remote employees in one go. And, best of all, you can lock in exchange rates. This last point is a crucial one, as the world has become politically unstable. With forward contracts, you can lock in a price, thereby avoiding costly last-second plunges.
Best for freelancers: Payoneer
Are you navigating the ocean of business in your own sailboat? You require a set of tools specific to your situation. The Payoneer mobile app offers that functionality, enabling everyone from copywriters to eBay sellers to move cash effectively.
Need to invoice clients? Payoneer allows you to submit them within the app. Do you sell on foreign Amazon/eBay marketplaces? Use Payoneer receiving accounts to repatriate your profits, sans international money transfer fees.
Are you moving about the globe as a digital nomad? Payoneer even issues prepaid cards in various currencies. This way, you can pay for things without worrying about horrendously expensive exchange fees.
Best for overseas workers: WorldRemit
As an overseas worker, your hourly wage is equivalent to what people back home make in an entire DAY. As such, you feel a huge responsibility to help family & friends in your home country.
However, existing remittance firms charge a king’s ransom just to send your payments. WorldRemit has made it their mission to disrupt greedy incumbents, like Western Union. This operation is legit – Ismail Ahmed, its Somali founder, watched his payments get torn apart by financial vultures for years.
Unlike other firms, WorldRemit tackles the most expensive money transfer problem of all – cash pickups. According to Reuters, some remittance corridors charge fees as high as 20% of the send amount.
By tackling these costs, WorldRemit is quickly positioning itself as a go-to option for remittance payments. For instance, for the USA/Nigeria corridor, they have a margin of 2.3%. For Western Union, it can be as high as 7.1%!
The toothpaste is out of the tube…
…and against the wishes of corporate CFOs, there’s no way to stuff it back in. Money transfer apps are here to stay, and they’re going to transform the industry fundamentally. Don’t wait until next decade to make the jump – try out one of the above-listed apps, and start saving!
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