Money Transfers

Money transfer services are easily the cheapest and fastest way to send money abroad while not jeopardizing the security of your funds. Most services are heavily regulated by leading institutions and display their credentials on their websites for clients to check.

Depending on the amount and reason for the transfer, most transactions take only minutes to arrive at the destination. There are different fee structures to choose from, and the providers tend to keep their fees along with the exchange rates as competitive as possible — routinely beating the high costs you’ll get from high street banks.

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The last few years brought a sharp increase in the use of payment systems such as Zelle, Venmo, Apple Pay, and Google Pay. While the latter two are used to pay for goods in several countries, transaction features remain largely US-centric, just as the other services listed. US users can use Google Pay to send money abroad through Western Union or Wise — but that’s about it.

PayPal, a veteran of mobile money transferring, has an impressive reach of 200 countries around the world. Despite being secure and quick, it is regularly criticized for poor exchange rates and high transaction fees.

While not many providers support the cash-in payment method, Western Union and MoneyGram being the leading names, a number of operators offer cash pickup services, including Remitly and WorldRemit.

Operators have a large global presence, and senders can find a nearby branch to deposit the money and choose the most convenient agent location for the recipient to pick up the cash. Both parties require some form of identification to verify the transaction.

Bank transfers move money from one bank account to another using the SWIFT system. A wire transfer doesn’t necessarily need a bank account to deposit or withdraw but will still run the transfer through banks.

As multiple banking systems are involved, both methods usually come with high fees and poor exchange rates. They provide a good level of safety but are still the least ideal way for international money transfers for those prioritizing low cost and speed. Due to the tedious checks within the SWIFT system, the whole process can take up to five working days.

Challenger banks typically operate as digital entities, with Revolut, Sterling, and N26 leading the market. While they are subjected to the same rules and regulations as established banks, they can offer their services for very low prices as they don’t have high overhead costs.

Dubbed immigration-friendly banks, their services generally support multiple currencies and allow clients to do transactions from any account with a single debit card. They are, though, unable to offer lower fees or better exchange rates than money transfer services.

The fee structure depends on the bank, with the most common being percentage markup. Some of them partner with online providers to perform the transaction (such as Monzo’s partnership with Wise) — which means costs coming from two different entities. Although it can be convenient for those who do most of their banking from a debit card. Challenger banks are not the most ideal way to transfer funds abroad for those who value low costs.

International money orders are the most straightforward, non-electronic way of sending funds abroad. A money order is a document, like a cheque, that the sender purchases from places like post offices, credit union offices, or banks. The sender then fills in the details and mails it to the recipient, who then cashes it at a third-party operator or a bank.

In comparison, it involves high fees and often takes quite a lot of time. On the flip side, they are quite accessible and easy to set up — none of the parties require a bank account to deposit or withdraw the money, and the transfer is easily verified with a form of ID.

Transfer fees are additional expenses the providers get from you to perform your transfer. There are typically three approaches to it: fixed fee, percentage markup, and no-fee policy. The senders tend to get better exchange rates with fee-based structures.

1. Fixed fee: The operator may request a fixed fee regardless of the transfer amount or may change the fixed fee above or below a certain limit. Fixed fees tend to be small for remittance companies, ranging from $0.50 to $3. Per transaction fees are higher (up to $50) with high street banks as it covers the additional costs that come with using the SWIFT system.

2. Percentage markup: The operators take a certain percentage of the transfer as a fee — which is not ideal for large or regular transfers as it quickly adds up. The margins can be anywhere between 0.4% to 6% for money transfer providers. Note that many banks charge up to 3% on top of some fixed fees.

3. No fee: Some operators go with a no-fee policy and offer a poorer exchange rate instead.

Some operators use a fee-free policy that makes money by offering less competitive exchange rates instead. To do that, they add a profit margin on top of the mid-market exchange rate, which is called the spread, so the sender gets a poorer rate for their currency conversion. The “margin” refers to the percentage difference between the exchange rate at which trade occurs and the rate the customer gets. Margins typically range from 0.4% to 5%, while rates on high street banks hover around 2% to 5%.

Note that operators seldom display the exchange rate margins, though most of them reveal it to explain how they make a profit off of international transfers. It is possible to calculate the difference by comparing the quote given by an operator and the mid-market rate from an independent source.

When using bank transfer with money transfer operators, there may be other unexpected fees during your transaction. It depends on the countries and the banks involved and may charge either the sender or the recipient. Many operators have contracts and account with selected banks — to avoid unexpected fees as such, it is ideal to contact the operator while doing a bank transfer and see the listed banks if there are any.

Some operators offer express services or alternative delivery methods for an additional fee. These costs tend to be small and negligible for one-off transfers but may add up for regular payments.

As you can guess, there isn’t really a way to send money abroad that is completely free. But there are ways to avoid or minimize the costs that come with it; here’s a rundown of top factors determining the cost:

• Transfer amount: If the sender is going forward with a percentage markup, the fee will naturally depend on the amount. But sometimes, clients can get better or worse fixed fees or exchange rates depending on the size of their transfer — this will depend on the specialization of the money transfer operator.

• The countries and currencies involved: Operators may increase the exchange rate markup or their fees for exotic or volatile currencies.

• Time of the transfer: While many transfer operators can perform transactions around the clock every day of the week, some require an additional fee to move your funds after hours and on weekends. To avoid this, you may want to consider completing your transfers within working days/hours.