International transfers are more in-demand than they have ever been. We can see from the growth of the remittance market that increasingly, small businesses, remote workers, and general growth in the global economy have led to more money being sent overseas.
Any economist will tell you that the most important thing when it comes to economic transfers – and markets in general – is efficiency. Being a free market isn’t quite enough, as we must aspire for as little friction as possible. Historically, this is difficult when it comes to international transfers of money, resulting in charges of around 3% to 4% by banks when sending money overseas – plus some fixed fees.
However, the FX market, on paper, is one of the most liquid in the world. There are so many buyers and sellers, and it’s open 24 hours, so it’s quite extraordinary that many businesses have been wasting up to 4% of their revenue in extortionate currency margins and remittance fees.
Fortunately, technological advancements and fintech startups made the market much more competitive and thus much more efficient. Most online money transfer companies are reflecting their access to the interbank rate (the “perfect” exchange rate) onto the customer, with only minuscule added margins – and often no fees – for an international online transfer to a bank account.
It’s somewhat a monopolistic market, so it makes sense. The product is the same – it’s difficult to offer a USP when sending money from the UK to Australia, thus price is the main focus of competition. This has resulted in a race to the bottom, despite banks still asking for 3% to 4% in fees. The caveat to this is that whilst some companies have focused on price, others have tried to differentiate themselves by offering a better service, a better app, business support, and so on – whilst others have stuck to the simplistic goal of being the cheapest.
Whether or not the blame falls on the banks for complacency or from difficulty in shifting ginormous legacy systems relying on SWIFT transfers and wire, the customers need not care as they now have an efficient way to send money for once.
The Top 3 Online Money Transfer Companies Today
The race to the bottom comes about because there have been so many new entrants into the market over the past 15 years. There is no single best company, but there are some companies that do differentiate their service as much as possible to accommodate different use cases.
So, here are the top 3 money transfer companies that serve a variety of different needs.
OFX – Large Payments Around The World
When it comes to online international money transfer, it’s difficult to argue against the notion that OFX is the best – at least, for large global payments. OFX is not a new kid on the block, they have been established since 1998 and offer a solid 50+ currencies, more than most other platforms.
Where OFX really excels is with large transfers. They are highly regulated around the world with offices in Asia, Europe, North America, and Australasia. One of their biggest advantages is that they have excellent dedicated managers who can facilitate safe, large payments that have competitive rates, expert guidance, and a great range of currencies.
There are no fees, and larger transfers are rewarded with the benefit of more competitive rates. Hedging is offered, a good mobile app, and fantastic phone and email support.
Wise – Everyday Cheap and Easy Payments
It’s difficult to fully appreciate the benefits of OFX without understanding the benefits – and limitations – of Wise. Wise only offers 21 currencies, offers no better rates for larger transfers, has no over-the-phone dedicated manager or support, and has no hedging products.
So, why would anyone use Wise? Well, Wise is for people who do not need any of the above, which turns out to be millions of people around the world. For the freelancers, tourists, and small business owners that simply send money frequently, and in small amounts, to a select few countries and prefer to use an app that’s exceedingly easy to use, it’s an ideal choice.
Wise has no discounts for larger transfers, but this results in the benefit of having a blanket 0.5% margin for most currency routes. So, once you know that your frequent route is 0.5%, you never need to worry or double-check the exchange rate offered. Users can send transfers as little as they like, in one tap, for cheap, as well as instantly open a receiving bank account in a different currency.
MoneyCorp – Credible Business Solutions
Whilst Wise is regulated and credible, it’s a fast-growing unicorn company and many people would prefer to have their business capital tied up into a company with a long history and better customer support.
MoneyCorp is an industry veteran, having been operating since 1979. They have a huge turnover of £43 billion per year, a banking license in Gibraltar, offices around the world, and handle 120 currencies.
With a vast range of functionality and dedicated support, MoneyCorp is ideal for businesses. MoneyCorp is a reliable company and is less about flashy innovation and more about consistent, high-quality service that clients can rely on. The mobile app may not be the best, but MoneyCorp offers expert services for sophisticated currency solutions.
It’s difficult to see a way back for banks anytime soon, with them falling further and further behind in both costs and level of service. One shining light appears to be challenger banks, which are offering more competitive rates for cross-border payments, though they’re still lacking in functionality, sophistication, and support.
The overall cost savings from avoiding high-street banks is staggering. An overseas Amazon seller could see differences of around 4% in their annual revenue – which may amount to thousands of dollars – simply by opening a receiving bank account with a money transfer company. It may just be the easiest money saved possible. Bearing in mind that many online businesses have very tight gross profit margins, it’s possible for profits to dramatically increase after being more efficient with money.
It’s not just receiving money from sales, but it’s sending money online when paying for stock and payroll, as well as sending money to a bank account from a different country. So, revenue may now have increased by 4%, whilst expenses may have decreased by 4%.
Setting up accounts with money transfer companies isn’t much more difficult than setting up a Netflix account. It’s the accessibility and free no-charge accounts that allow us to have accounts with multiple apps – each for a different use case. So, we may have Wise for when we go on holiday and pay freelancers, OFX for our personal investments, and MoneyCorp for paying suppliers and receiving revenue into.