When it comes to exchange rates, not all of them are created equally.
This is especially the case when you want to transfer money and your bank or a transfer service gets involved.
Let's say you are in the US and you've tried to send dollars to an account in the UK. Your bank promises you that there's “0% commission” and they definitely offer “free money transfers”. 99 times out of 100 this couldn't be further from the truth.
There is inevitably some markup that is added to the transfer and you aren't getting what is known as ‘the mid-market rate'. The mid-market rate is basically the real rate. If you Googled the exchange rate between the US and the UK now that is what you should be getting.
What if we said that you could get that mid-market rate when sending money between different countries? That there were no unexpected fees and that you could send money between accounts in different countries up to 8x cheaper than you bank could?
Well, you would probably think that was a good idea…
TransferWise Review: Overview
This is where TransferWise comes in. But who are they?
TransferWise is a UK based company that believes that money should have no borders and is the brainchild of Kristo Käärmann and Taavet Hinrikus.
Taavet was working for Skype in Estonia and was paid in euros despite being based in London. Kristo, on the other hand, worked in London but was paying for a mortgage back home in his native Estonia.
Their plan was simple. Every month they looked up to find the mid-market rate, Kristo then sent pounds into Taavet's UK account and Taavet sent Euros to Kristo's account.
Both received the money that they were promised and there were no nasty hidden fees involved.
From this TransferWise was born and it has set up accounts all across the world. Now you just simply pay into TransferWise's bank account in the country of your choosing and they will pay your recipient with the correct exchange rate.
Since it's inception in 2011, TransferWise now has over 4 million customers and is backed by investors involved in companies such as Virgin and PayPal.
TransferWise Review: Pricing
The biggest advantage of TransferWise is how transparent they are with pricing.
In regards to costs, these will all be different based on how much you are sending, what country you are sending it to and what the currency is.
In the case of the conversion GBP->EUR, the fee is calculated as:
0.35 x amount converted + £ 0.80 GBP
So in this example, the total fee would be 0.402%.
When you consider that banks can charge anywhere between 3-7% and PayPal can charge around 6-8%, then 0.402% is a massive saving!
Debit and Credit Cards
If you're looking to pay via credit card, then again it's dependent on the type of credit card you will be using and the currency you're sending from. These fees can range anywhere between 0.3-2%.
Debit cards are free in specific currencies but may incur a small fee of 0.15%-2%.
TransferWise Review: Features
For your e-commerce business, you have the opportunity to set up a TransferWise Business account which allows you to get paid for free from anywhere in the world. Additionally, you can hold and then convert your money in yo over 40 currencies. This allows you to spend money anywhere in the world completely stress-free.
So how does that work?
Essentially you receive the local bank account details which then allow you to receive payments in major global currencies such as Euros, US dollars and UK pounds.
You then pass these bank details on to your recipient which helps you to avoid the high markups that you get with international payments.
Exchange Rate locking
When transferring money TransferWise automatically locks the exchange rate for a specified amount of time.
For the vast majority of countries this is 24 hours, several it's locked 42 hours and BRL (Brazilian Reals) is locked for 72 hours. This ensures that you massive fluctuations in the exchange rate will affect you at the last minute.
Linked to the borderless business account that we mentioned earlier, you can also apply for a TransferWise debit Mastercard.
This is currently only available for the majority of European based customers, which you can see a list of the countries here. It is very soon to be released in the US and is in the Beta stage, you can join a waiting list to sign up for one.
How can the card be used?
For a start it's contactless and it allows you to spend money anywhere in the world at the promised exchange rate. It's always free to pay with any of the currencies you hold within your account and if you on the chance you wanted to convert to a different currency, TransferWise offers fantastic low conversion fees as well as zero transaction fees.
You can also make withdrawals of up to £200 a month at any ATM.
TransferWise also offer a mobile app so you can make transfers whilst on the go. The app itself has received a 4.5 out of 5 rating from over 4,000 users on the Google Play Store.
To speed up the process of payments, you can also look at previous payments and repeat them with the touch of a button. This is perfect if you have static monthly payments to make. They have recently added Apple Pay to transfer funds and another handy feature is the ability to use your camera to add your card details, rather than manually entering them.
TransferWise Review: Security
It's worth noting at this point that TransferWise is not a bank.
However, it is authorised and securely regulated by the Financial Conduct Authority (FCA) in the UK just as any other bank would be.
Under regulations enforced by the FCA, TransferWise has to hold all the funds from their customers separately to the money that they use to run their company.
Therefore you can be confident that in the very unlikely event that TransferWise fold (which isn't likely when you boast 4 million customers) your funds are secure and will be paid back from the separate account.
TransferWise Review: Support
The FAQs online are well-organized with sections for transfers from and to any currency TransferWise works with. You can also get information about the , which not all providers explain. If you need to ask a question, you can start a live chat with a customer service representative.
TransferWise’s mobile app receives 4.6 stars on the Google Play store and 5 stars on iTunes for the current version.
But outside the web experience, you’ll run into a downside. You can reach customer service by phone only from 8 a.m. to 8 p.m. ET on weekdays.
TransferWise Review: Signing Up
To make the initial signing up process smooth TransferWise will give you the option to do so via your Google or Facebook account.
Before you can begin though there is a strict process to verify your identity in order to comply with anti-money laundering regulations. You will need to provide any of the following two documents:
- Identification Document – Passport, National ID card, Photo Driver's Licence
- Proof of address – Utility bill (phone, electricity, gas), credit card statement, tax bill, vehicle registration
It's worth noting that a mobile phone bill is not accepting.
Pros of TransferWise
- Fees – compared to the fees you would pay if transferring via a bank account or PayPal, TransferWise blows it out of the water. From the example above a transfer of £1,500 to Euros had a fee of just 0.402% compared to fees of up to 8% with the alternatives
- Transparency – there are no hidden fees with TransferWise and the company is built on this ethos. Their handy widget spells this out for you as well. The only additional fees are for debit and credit cards and all this information on their help section
- Speed – the speed of the transfer is a big plus point of TransferWise. Most of the time it takes up to just 24 hours and is the same speed, if not better, than an international wire transfer
- Rate locking – TransferWise realises that it isn't your job to keep up with exchange rate predictions and this can be very time-consuming. From the minute your payment is locked in they will lock it for a period of time to avoid huge fluctuations
- Security – TransferWise adheres to regulations by the FCA so all your funds are held in a separate account. This ensures they are safe if anything were to happen to TransferWise. Also as a company, they are backed by Virgin and PayPal investors so are unlikely to go anywhere anytime soon!
- Business Account – the ability to send, receive and spend money in over 40+ currencies is a fantastic advantage for international businesses. You can set up local business accounts in minutes without even having an address in these countries
- You have more control over your exchange rates – When you send money internationally, you can choose the point Transferwise calculates your exchange rate; either on the day you activate the transfer or when the transfer becomes effective. This increases the likelihood of getting a better deal.
- User Friendliness – Transferwise's interface is straightforward and easy to use.
- Various payment methods are available – For your convenience, Transferwise accepts a variety of payment methods.
- Transferwise doesn't demand a minimum transfer size.
- Transferwise's registration process is clear and easy to understand.
- There's a high daily transfer limit – You can send up to $49,999 each day using Transferwise (or $199,999)
- Batch payment tool (for business accounts)- This Transferwise tool allows you to make numerous transactions with just one file upload. All you have to do is fund the transfers, and you're good to go!
- High levels of client satisfaction.
- Track your transfers every step of the way via your Transferwise account
Cons of TransferWise
- Support – there is no phone support available which could be handy, especially in the early stages of setting up your different bank accounts
- High Volumes – for large transfers TransferWise's fees would definitely be beaten by bigger corporations such as Moneycorp
- Sign up – having to show two documents can be a laborious process and it is quite slow. The fact that a mobile phone bill can't be used has been listed as a complaint among users
- US Mastercard – a Mastercard is still not available for North American companies. However, it is in its beta stage and will be available eventually
- Bank account transfers only – There's no option for either a cash or cheque pickup. Instead, with Transferwise you can only send money to a recipient’s bank account.
- Requires a Social Security number- You’ll need to provide an SSN to send money via Transferwise (which not everyone is comfortable with).
- Cannot pay recipients via cheque– As Transferwise uses a percentage system to calculate transfer fees, the more you transfer, the more money you pay them. Over time you may find the fixed rate pricing model more cost-effective for you- especially if you're frequently sending large sums of money.
- Limited reach- If you're a business with clients and customers scattered across the globe, Transferwise might limit your reach, as they only support 55 countries.
- There's a chance Transferwise will deactivate your account- When you hit a specific transfer threshold Transferwise will ask for additional documents and ID. If you're unable or unwilling to meet these demands, there's a good chance they'll shut your account.
- Transferwise doesn't offer any FX options
How Does Transferwise Compare?
Here's how Transferwise fairs against a couple of their competitors:
PayPal vs TransferWise
In short, it's cheaper to transfer funds with TransferWise rather than PayPal (read our full PayPal review). Namely because unlike PayPal, Transferwise doesn't make money on exchange rates. Plus, the percentage charge on the overall transfer is minimal. Whereas let's take invoicing on PayPal as an example, these funds will be charged anywhere between 3.4% to 1.9%!
Despite all that, PayPal's far more popular. As such, clients and customers usually feel more comfortable using this company- especially when it comes to handling larger sums of hard-earned cash.
2Checkout vs. TransferWise
2Checkout beats Transferwise when it comes to the number of countries they operate in. Transferwise only supports 55 countries whereas 2Checkout (read our full 2Checkout review) works in over 200 countries.
However, like PayPal, 2Checkout also charges huge trasfer fees. For example, if you want to transfer money within the US, you'll have to pay 2.9% of the total sum of money plus an additional $0.30.
You should also note, the price of making an international payment goes up significantly (which is where Transferwise comes into its own). Not only do 2Checkout users have to pay a 1% cross border fee, but they also have to shell out for currency conversion. This can be as much as an additional 2-5%!
Is TransferWise Suitable for Me?
You are a small/medium e-commerce business that deals with either international partners or you have remote employees in different countries. The amount of money you will save even in the first few months could then be spent to help expand your business.
Obviously, if you don't deal with anyone internationally, then TransferWise isn't for you. If you are also looking to transfer larger sums then it may be beneficial to use a larger FX institution as Moneycorp or Western Union
TransferWise Review: Conclusion
TransferWise is a fantastic platform for sending money internationally. It's created by two people who experienced the same issues themselves and have built a tool from their own frustrations.
A streamlined onboarding process, low fees and great transparency ensure it's only going to go from strength to strength. Backed by huge investors and with FCA security, you know that your funds will be safe.
Although primarily a company for European users, TransferWise are looking to expand their market to North America which hopefully, in turn, will help bring better rates to these parts.