Did you know that the institutional foreign exchange market exchanges $4.8 trillion of transactions each day? Or that the statistics on the value of global cross-border payments worldwide from 2016-2022 in the retail sector is expected to increase from 1.95 trillion USD in 2016 to 3.56 trillion USD in 2022? Those numbers and figures are phenomenal and ask for a deeper look at who is transferring money abroad and why.
Things to keep in Mind for Transferring money abroad
Sending money across borders has been a standard procedure if one looks back on human history. However, all that has changed in the past decade because of the shift towards digital payments. Social media and e-business make the world feels much smaller and have shrunk the speed of global trade. Both businesses and individuals are taking advantage of the ease of transferring money abroad.
Businesses send money internationally to pay their foreign suppliers, employees in foreign offices, make payments for factories and their operations, and buy property. However, business isn’t the only reason behind the transfer of currency abroad as common people look for instant money transfers abroad to make overseas investments, pay tuition fees, send money to friends or family, or pay for travel or when shopping for something from abroad.
USA and Saudi Arabia are the most prominent country markets for sending money, while China and India receive the most money. The underlying pattern shows that money is being transferred globally from economically developed countries to developing ones. According to World Travel and Tourism Council report, North America, Northeast Asia, the European Union benefited the most from travel and tourism with the contribution of 1.5 trillion U.S. dollars to each of these regions. International travelers need money abroad for transportation, entertainment, lodging, meals, & recreation.
It is essential to focus not just on the unprecedented volumes of money being transferred abroad but also on the costs associated.
The costs of transferring money abroad
Sending money abroad has indeed become quick, but the system is not fully transparent, and the fees charged can be high. When you need to send money overseas, you will be charged a transfer fee and the exchange rate. Banks and independent money transfer services can charge a flat transfer fee or the percentage of the total amount being sent. As that fee and rates can vary, the onus lies on the individual to save on these fees by comparing banks and transfer services and choose the best options.
World Bank expects more than $500 billion transfers from the developed world to less wealthy countries every year. With average transaction costs of 7%, it means that more than $35 billion are eaten up by fees due to unfavorable exchange rates and explicit fees. It means that for every $100 sent, one loses 7$. The Federal Reserve in the U.S. is thinking about creating a faster and cheaper system for greater efficiency and transparency in the system of sending money abroad.
Sending money from one country to another is entirely different from making a money transfer domestically due to the complexities of different currencies and different charging fees within the banking systems.
Higher costs and lower transparency in exchange rate fees
As a customer, one should know how much they are paying for cross-border money transfers. However, the higher costs and lack of transparency among the service providers make it difficult for a common man to make the right choices and recognize the hidden fees in exchange rates.
Currency Exchange Rates are also known as foreign exchange rate fees or conversion rates and are used by the service provider when sending money internationally. But are you paying the accurate exchange rate? Or are you getting fleeced by the banks and money transfer companies?
Banks typically resell currency exchange to clients and add a markup to the final costs. They never disclose their markup, and the higher the markup, the higher is the profit for the bank. Thus, the currency exchange department of the banks is a huge profit generator for them. As most clients ignore the markups and the bank keeps silent on them, the currency exchange markup remains in the remittance markets.
Several commercial institutions knowns as Many Money transfer operators (MTOs) have emerged and these are usually not banks but are involved in cross-border transfer of funds.
They use internal own internal system or a -border banking network to transfer funds across borders. MTOs are driving healthier competition in the remittance services market, and banks face the highest pressure as they are the most expensive service providers at an average cost of 11.0%, compared to MTOs at 6.1%.
It is essential to make reliable real-time comparisons of the different money transfer companies and assess them for convenience, safer and faster services, and of course, their fees and exchange rates. So, if your bank or service provider charges more than 7.7% hidden markup, it is time to look for other options. Wise money transfer is a name that is becoming popular among customers who want to manage money across borders.
Wise money transfer – For transparent foreign exchange rates
Wise money transfer company is making waves in the world of money transferring abroad and for good reasons. TransferWise has rebranded as Wise in 2021 and you can easily get a Wise money transfer card for just 9 USD and use it in 200 countries.
Here are some good reasons that make Wise money transfer increasingly popular
- Can use Wise money transfer card in 200 countries
- Receive payments in 10 currencies like a local
- Spend with Apple and Google Pay
- Works with real exchange rate fee and no hidden fees
- 6x cheaper international account than banks
- Hold multiple currencies completely free
- Direct Debits in the U.K., Europe, U.S., and Canada
- No minimum transfer amount
- Professional customer service
The aim of Wise is to bring transparency to finance and charge as little as possible for and offer the best exchange rate for transferring money abroad. Now you can send money to 80 countries, fast, easy and safe and always with a much lower exchange rate and transparent fee.
Wise money transfer is indeed making managing money in multiple currencies across the borders a breeze. You don’t even need to perform any exchanges with the borderless Wise money transfer card!