It’s been almost a year since I’ve been using TransferWise for foreign exchange transactions and sending money abroad. To date, I’ve transferred £24.4K and saved £760. I had previously used PayPal but switched after I delved into their currency conversion fees which are relatively high. I’m very content with TransferWise and will detail my experiences in this post.
TransferWise is one of several financial technology (FinTech) companies disrupting traditional lines and practices of businesses. By “disrupting,” they’re leveraging technology and innovation to drive down consumer fees while making the process more convenient. Companies such as Wealthfront (robo-investing) and Lendio (loans) also fall into this category. What we see with FinTech companies is a revolution against unfair and buried costs that take advantage of consumers (very much the philosophy of the mutual fund industry). According to TransferWise,
“Sending money abroad is deceptively expensive, thanks to the hidden charges we’ve all been forced to pay. The banks claim “free money transfers”, “0% commission.” Sounds like money’s already flowing freely, but far from it. It’s pure propaganda.
TransferWise removes all the wrongness, letting people send money abroad at the lowest possible true cost. Using only real exchange rates and tiny not-hidden-fees.”
I learned of TransferWise through CrunchBase on news of a successful funding round. In June 2014, Richard Branson (Virgin) invested $25M in the company which got my attention. Furthermore, the company was founded by Taavet Hinrikus, Skype’s first employee, which adds a lot credibility.
TransferWise is a currency conversion service, so customers can’t receive and send the same currency. The only exception for this is their ‘Requests’ service, where GBP-GBP and EUR-EUR payments are possible. Therefore, if you want to send money in the same currency, they won’t suffice. Also, perhaps because of rules and regulations, I can’t use TransferWise to transfer money out of my PayPal account. Transfers must originate from a bank account. Maybe this will change in time making it even more convenient and saving me a step.
Look out for Fees and Exchange Rates
With foreign exchange transactions there are two items to be aware of:
- The flat or percentage-based currency conversion or transaction fee
- The quoted exchange or conversion rate
TransferWise charges an inexpensive fee of 0.5% to 1% for widely held currencies such as USD, EUR, GBP, and CAD. The rate is a little higher for less liquid or transacted currencies, but still much better than most alternatives. Since they advocate transparency, their fees can be found on their pricing page, so you’ll know what your transaction will cost in advance. Additionally, they offer a best price guarantee on the more than 30 currencies they support.
As for the exchange rate, TransferWise will transact your money at the best possible rate known as the mid-market or real exchange rate (I call it the Google rate). They’re able to offer this rate based on their matching currencies business model.
One other important consideration could be timeliness in which case TransferWise completes transactions within one to four working/business days which is standard for most money service providers.
Who Should Care About Fees and Rates?
Foreign exchange, sending money, and money transfers is a trillion dollar plus industry that impacts businesses as well as consumers. In particular, these four groups should be interested in using the best currency conversion services to manage their money wisely.
- Online or overseas workers and digital nomads
- Online/offline business owners who transact in multiple currencies
- Frequent travelers
Money Transfer Comparison
It took me a matter of seconds to realize TransferWise was a better option than PayPal, but I wanted to see how they compared against other well-known providers including Western Union, MoneyGram, and Xoom (a PayPal company).
For my experiment, I only have $1,000 USD to send and not a penny more. Therefore, any fees that aren’t included in the total must be deducted from my amount, for instance, I would subtract a service charge of $20 from my funds leaving me with $980 to send. Secondly, I’m going to be sending my money to a friend in Canada, so the final totals will be in Canadian dollars (feel free to experiment with different currencies, but the same outcomes are likely). Here are the results.
|Company||Fee||Exchange Rate||Amount Sent in Canadian Dollars|
|Western Union||$19.99||1.2206|| $1,196.30
TransferWise outperformed everyone and was the only company to give me the real or mid-market rate as per their claim.
TransferWise offers an excellent user interface, customer experience, and variety of currencies, but you may prefer or need a different service provider to meet your needs. I recommend exploring the following companies which also offer low fees and fantastic exchange rates.
Who to Avoid
Alongside TransferWise, I believe that transparency is important. I like that they offer a calculator on their homepage which I can access without having to create an account. Companies like Travelex that force you to sign up to access conversion fees and rates are outdated and untrustworthy in their processes. Similarly, I don’t recommend that you use the following companies based on transparency, ease of use, fees, and rates.
- Banks in general
We work much too hard for our incomes to be swindled by big banks and mismanaged money service providers. As a result, remember to look out for fees, exchange rates, and details in the fine print to manage your money intelligently. Also, if you send money frequently or in large amounts, you could be losing thousands through a terrible service provider.
It’s one thing to consider my review in isolation, but another to explore 35,000 reviews at Trustpilot that have led to a 9.5/10 for TransferWise.
Rating for TransferWise