Since I live in Australia but still have a foot in New Zealand with my rental properties, I do need to regularly transfer funds between the two countries.
I don’t know whether you remember the bad ol’ days of international money transfers (and it’s still happening today) but the only way to do this was to go to your bank, fill out a form, pay the bank a seemingly huge fee, and see your funds disappear into the banking ether for what seemed days at a time.
I always questioned how they justified this fee and why my money took so long to reach an overseas bank account. It’s not like they had a guy with a bag of my stash hop on a plane, fly across the world and hand deliver it to the receiving bank is it.
No, it’s all done, supposedly seamlessly, by sophisticated, high-speed, super secure computers. If I can email my holiday snaps to all of my offshore friends in seconds, how long does it really take to transfer money from one account to another, and how much does it really cost? Banks, now is your opportunity to redeem yourselves. No, I didn’t think so.
More recently, we have seen the growth of specialist fund transfer companies. Firstly, walk-in branches, and more recently, online.
I’ve been using one of these for a while and have found that the transfer time has reduced to around three days and the cost, around AU$9 depending on how much I’m sending.
Besides that fairly paltry service fee, how do these guys make their money? Now if you go and check the official exchange rate (known as the mid-market rate), you will find that there’s a few points difference between what you pay them and what the actual rate is.
Basically, they buy funds at a lower rate than they sell them to you and me. That’s their ‘mark up’ and that’s how they really make their money.
So when I saw a new app advertised on Facebook offering low fees and mid-market exchange rates, I had to have a look.
TransferWise was formed in 2011 and has some very strong backers who have been instrumental in disrupting the business world status quo, including Virgin founder, Sir Richard Branson and PayPal co-founder Max Levchin.
Based in London, TransferWise supports over 300 currency routes across the world.
So how does it work?
After registering (on a computer is easier than smartphone), you are required to enter some personal details and your bank account details. That’s pretty well it.
If you wish to send funds out of Australia you will need to provide a scan of some valid ID such as driver license or passport. You should check the TransferWise website for details of other countries but it is quite common these days as part of the international money laundering and anti-terrorism laws.
Now you can transfer money between countries either to yourself or anyone else once you have their bank account details.
In addition to transferring from your bank account, you can use your credit or debit card although this does attract an additional charge and no doubt your credit card company will charge you interest on the funds withdrawn. Probably not the best option for the financially wise.
Another feature of TransferWise is that you can request money from a payer, perhaps a customer based overseas. You create a request which generates a link that you send to your payer. The payer does have to set up a TransferWise account but once that’s done, they use the link to pay directly into your account avoiding the high bank fees and paperwork traditionally required for making overseas payments. Clever stuff.
Is it secure?
Well, it certainly appears to be.
I did do quite a bit of research before entrusting my funds to a new organisation and discovered that TransferWise is required to be and is registered under the financial conduct regulations of the countries it operates in. In Australia, New Zealand and USA, TransferWise operates under the license of their partner banks and so meets the licensing requirements of these financial institutions.
This is good so far.
And from a technology point of view, TransferWise uses industry standard encryption for its internet communication with your computer and smartphone.
Last but certainly not least, how much does it cost?
Very little compared to traditional bank transfers and cheaper than the specialist transfer companies I’ve used in the past.
Although quite low, the fees do depend on which currencies you’re transferring to and from, the amount that you’re transferring, and the exchange rates of the day. However, it’s not as complicated as it sounds.
For example, transferring funds from Australia to New Zealand; For amounts under AU$20,000 there’s a 0.7% fee with a minimum of AU$2. For amounts over AU$20,000, it’s 0.7% up to, and then 0.5% on anything over.
Transferring funds from United States to Great Britain, it’s 1% on amounts up to US$5,000, and 0.7% on anything over with a minimum fee of US$3.
My first transfer was a small one to test the water. I transferred NZ$100 from NZ to my Australian account.
Using TransferWise, I received AU$93.18 which is an exchange rate of 0.9318 and it cost me AU$2.
Using my usual company, I would have received AU$91.75 which is an exchange rate of 0.9174 and would have cost me AU$8.30.
The time from transaction to receiving the funds into my account was 3 days. About the same as my usual company but on this tiny transaction alone, TransferWise saved me AU$7.73!
Now start multiplying that saving by much larger amounts.
I also checked the mid-market exchange rates on xe.com at the time and TransferWise’s rate was almost spot on the xe rate.
TransferWise definitely meets my requirements for safe, simple and cost effective transfers, and I’ll be using them again next time I have to transfer funds overseas.
As always, this review is based on my own personal experience and should not be construed as a endorsement of the company. And with all providers, make sure you do your own research and ensure that they will meet your particular requirements.
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