Have you ever sent money abroad and felt that you paid sky-high fees for money to arrive many days later? This feeling is all too familiar for both businesses with overseas branches and individuals who have ever moved abroad. Despite how far we’ve come in terms of technology advancements, when it comes to international money transfers, many of us still have one collective foot in the 21st century and the other in the black-and-white ages.
So why does international money transfers cost so much? There are many factors that play into this. Hidden margins, gross markups, and the likes. However, we like to believe that the reason to why international money transfers are so expensive is because banks know that their clients are likely to accept their hidden costs. Just last month we reported on the Santander leak and how in 2016 the major Spanish banking group made a whopping €585m solely on international money transfer fees and an extra €290m by controlling its foreign currency exchange rates. The most shocking thing is that 80% of all global money transfers are still conducted through banks and conventional intermediaries.
If you need to send money abroad, find the best deal by checking out independent money transfer processor sites to find prices that would work for you. Comparing prices doesn’t take much time but could save you a fortune in the long run. We have compiled the information you need to compare and decide what is the best transfer channels for you to issue international money transfers.
The worst ways to send money abroad
HIgh street banks are among the most expensive options to send money through. Let’s consider the case of Samantha, who regularly sends money to her daughter Amber who is currently completing a degree at New York University. If Samantha were to send rent money from London (GBP) to New York (USD) using a major English bank, it can easily cost her as much as £200 in total for a transfer of £5,000. Over a year this number rises to £2,400 just in fees and steep exchange rates.
New ways of sending money are not that much better
As ways of sending money advances through technology, new breeds of peer-to-peer operators start emerging. Two of the leading players of peer-to-peer transfers are Transferwise and Azimo, both London-based startups. One of the advantages of these peer-to-peer operators is the eliminated exchange rates as the platform matches buyers and sellers looking to exchange currency. However, one of the main challenges of this money transfer model is that these businesses inherently assume that there is an equal number of buyers and sellers for any given currency.
The problem with this assumption is that it is strongly prone to asymmetric activity. An example of a situation would be the huge swings in the pound around the Brexit vote. As we saw then, many were looking to sell their pounds but no one was buying. Both Transferwise and Azimo limited their business or stopped transfers altogether, with Azimo being forced to stop its activity based on restrictions from Barclays. Reliability and sustainability remains as challenges to peer-to-peer money transfer models, which still has deficiencies.
Bitcoin, a cheaper and faster solution
Bitcoin, the most popular cryptocurrency in the world, remains as one of the most economical way to send and receive money across borders. Often overlooked due to its “complexity”, the cryptocurrency offers many benefits for those looking for a much more efficient way to send money to anyone around the world as it shortens the time of trade settlements and provides users with the best possible exchange rates. Backed with Blockchain technology, Bitcoin helps its users avoid paying steep fees and poor exchange rates often charged by traditional gatekeepers like MoneyGram, Western Union, and even outperform the peer-to-peer operators.
Bitcoin is disrupting the remittance industry because everyone can send money to anyone, even those without bank accounts, all while paying up to 4% at the most. With Bitwala, this number goes down to 0.5% and as you would pay the fee on top of the amount, your recipient gets exactly the amount of money you send out. Users are also saved from the headaches resulting from the technical complexities that often come with using Bitcoin thanks to our very user-friendly web and mobile app interface.
As we empower people to make cheaper and faster money transfers, individuals and businesses of all magnitudes may significantly cut cost and save time when sending money abroad through the Bitwala platform. Those looking into using Bitcoin in their everyday lives may also enjoy the efficiency and great exchange rates through free-of-charge mobile money transfers in Africa, cross-border transfers in over 20 local currencies.