If you have suppliers, customers and business partners in other countries then sending funds overseas is likely a routine part of your business.
But there is nothing ‘routine’ about the cost of sending international money transfers.
Prices can range from as little as $9.99 to over a $100 depending on the financial institution (FI) or online payment provider you select.
While having your bank handle money transfers may seem like the simplest way to go, the evolution of financial technology (FinTech) has opened a new and more competitive avenue for sending money around the world.
Here’s a look at the cost and time factors that come into play at banks and FinTech companies.
The exchange rate is the cost of converting funds from one currency to another. Foreign exchange rates vary widely from FI to FI, so it’s always important to shop around and compare rates – a difference of even 1% could save you a lot of money.
At the bank: Exchange rates at the bank are not always the best. Ever heard of the term “interbank rate”? That’s the rate banks pay when exchanging money with each other. When banks exchange currency for businesses or consumers, they start with the interbank rate then add a margin on top; as much as 10%. Banks also scale their exchange rates based on dollar amount. Meaning, businesses will get a better rate the higher the amount being converted.
Many banks set their exchange rate just once a day, and that rate will remain fixed no matter how that currency trades throughout the day. Depending on Forex (FX) currency market fluctuations - this may or may not work in your favour.
FinTech Companies: With today’s technology, online money transfer services like WayPay have become competitive players in the currency market. Like banks, they too specialize in sending money overseas and handling large currency volumes. But unlike their FI counterparts, FinTech companies offer extremely low FX rates that are very close to the interbank rate.
WayPay uses a real time in-app currency converter, so, there is no daily rate. Foreign exchange rates are up-to-the-minute giving businesses a true market rate.
Wire Transfer Fees
Every FI will charge some kind of fee to transfer B2B funds; each with their own unique pricing model.
At the Bank: Banks in general charge a higher fee for international money transfers. Prices typically range between $30 and $80. Some banks will charge a flat rate, while others charge a percentage, typically 1 to 2%, of the transfer amount.
Businesses also need to factor in the cost of time it takes to wire money using bank. Someone has to physically go to the bank to complete the transfer, and the bank transfer will usually take 3-5 days to process.
FinTech Companies: Online money transfer services offer much lower and flexible pricing options. WayPay, for example, offers pricing based on number of transactions. Businesses who transfer money frequently can sign up for WayPay’s Premium Account and send unlimited wire transfers for $89.99 a month (when using the in-app currency conversion). That’s basically the cost of one transfer at other FIs. For businesses that don’t make many international payments, they can opt to pay per a transaction fee of $9.99.
FinTech companies are also saving business owners time. Payments can be made to over 130 countries in 100 currencies, and they don’t have to go to the bank to make payment! Business owners can make cross border and international payments 24/7 right from their desktop or from a mobile device.
Hidden Costs and Other Fees
It’s important to check for hidden fees and other charges. They may be in the form of a commission or a handling fee. There may be an extra fee for faster service. There are sometimes obscure charges like Anti-Money Laundering costs too.
Adding It All Up
At the Bank: While the big banks are reliable and can facilitate payments in any currency, there’s a greater chance of experiencing higher rates, transaction costs and hidden fees. Plus, processes are cumbersome and time consuming.
FinTech companies: The innovative solutions provided by online foreign exchange payment providers like WayPay are a game changer. WayPay has low competitive rates, a transparent fee structure, and convenient, fully automated services that let business owners wire money on their own time.
If your business needs to send money cross-border or globally overseas, it will pay to do your homework on which FX service provider will provide the most benefits.
The information in this article is for educational and information purposes only and should not be relied upon for decision making. Always seek the expertise of a professional advisor or accountant prior to making any decisions.