The internet can feel like its own little world existing outside of international regulations. But if for example you ever buy anything online from overseas or maybe invoice a client in another currency, you’ll soon realise that it’s not. In this article, we are going to take a look at how to use the internet to help you cheap money transfer internationally.
Dream It Big
The Silicon Valley tech-hippy visionaries who (ahem) “built” the internet envisioned it as a world without borders. The dream was that geographical limitations, national barriers and ancient tribal allegiances would melt away as we all became one in cyberspace. And sometimes it does feel as though this fantasy has been realised. On Facebook, I am free to exchange insults with people I have never met on the other side of the world and the language translation algorithm means I don’t even need to worry about making my mirth understood. In 2012 it was the power of Youtube that temporarily united the world and got us all (well not me) doing it Gangham style just for a while. In fact, 99% of the time, when using the internet it almost is like a seamless, united world.
But every now and then we get some very strong online reminders that geography is still a thing and that nations are going nowhere. One common example is when Netflix suddenly tells you its latest hit drama is not available in your country (it’s probably overrated anyway). But the most striking of these for me is when transferring money abroad and realising just how much it costs even via cyberspace.
Moving Money On The Internet
There are loads of reasons why internet users need to transfer money abroad. Many of us do it regularly without even being fully aware of it. For example, if you have even a small Amazon or Etsy shop you will sooner or later by getting paid internationally. Or if you order the latest state of the art cappuccino machine from Italy, you may well find that PayPal is suddenly asking you to pay in Euros even though the website was priced in dollars. If you rent an Airbnb or buy property abroad, then you will be handling big-money transfers. Even if you get into cryptocurrencies (more on this later) you may well have to change your own current into USD before you can get the good (or bad) stuff depending on which platform you use.
Here is the thing – the money transfer and forex (currency conversion) tech and interface are so easy to use that we hardly notice we are using it. And this means that we barely ever notice that we are being ripped off! I will explain. When Paypals ”proceed to payment” screen suddenly switches from USD to Euros it ever so kindly does the currency conversion for you – but do you know it’s giving you the worst possible exchange rate and keeping the difference itself?! Did you also notice that totally unnecessary $x ‘conversion fee’ it’s levying too? If you are paying online directly from your bank account to an overseas merchant, then it gets even worse!
As a buyer, you can often end up paying dimes or dollars more than you need to. All too often online sellers find that they receive far less for their goods once the conversion has been processed, eating into their profit margins.
So what can be done?
The good news is that there are better ways of doing business as both a buyer and a seller and there is a cheap way to transfer money internationally. Money Transfer Services have been around in various forms for a long time but over the last decade, the industry has reinvented itself for the digital age. It seems that every week a new fintech startup is offering lower rates on money transfers so it really is a customers market.
Money transfer Versus Banks
Let’s go-to basics. If you move money abroad via the banks then they will send the money from your account to the recipient’s account. They will work out the conversion rate and this will be non-negotiable. However, they will apply the “true” inter-bank rate but will apply one which lets them take a little commission.
But they won’t stop there. Any bank will also levy a fee for handing any international payment. This could be a set amount of $2.50. It could be a % cut that may add up to $1k if you send a large enough amount. It gets worse still. The recipient’s bank will also charge a fee, and in the event that the sender and recipient bank do not have direct business relationship, then they will have to use a 3rd party, an intermediary bank that will also charge a fee. Often, the sender will have no idea why they sent $100 and yet the recipient only got $92.50.
Money transfer services however bypass the banks completely. Money transfer services have offices, or partners, all over the world so they do not need to use the banks. For example, let’s say you use Lumon Pay (many other money transfer providers are available) to send money from the UK to the US. What will happen is that their UK office will take your money, and the US office will send their own money directly to the recipient’s account. This is how they are able to execute International transfers both faster and cheaper than the banks. Of course, they will charge a fee for the transaction but it will be transparent and it will be lower than the banks or other services will ever charge.
Bitcoin and other Cryptocurrency can also be a way to handle an affordable money transfer abroad. The Crypto market is well and truly outside of the reach of banks and is barely even regulated at all. This means that you can send alt-coins from your wallet to the recipient’s wallet anywhere in the world seamlessly. Because Cryptocurrency has its own value, there is also no issue with arguing over conversion rates – after all, 1 XR (or Ripple) is 1 XR whether you are in Denver or Denmark.
The big issue with Cryptocurrency however is that it simply is not widely accepted (though more businesses are opening up to the idea). For example whilst Tesla initially indicated they would accept Bitcoin, they quickly reversed this decision. Another factor is the sheer volatility of Cryptomarkets – the coins’ values fluctuate against the USD so much that vendors and sellers are often reluctant to transact in them. This is understandable, 10 years ago 1 single Bitcoin might buy you a pizza if you could find anyone willing to accept it. These days it will buy you a Tesla (but you’ll need to change it to USD first of course!).