You might think that this is a topic that is intended for businesses or international travelers. Not quite. In fact, if you are anyone, from a student to a working professional that is looking to send money back home, you should be interested in this topic.
Given how globalized and internationalized our world has become, education, trade, or travel means negotiating and managing international currencies and payments. In this regard, a crucial question that emerges is- what are the best international money transfer platforms?
Receiving payments from abroad means working with a money transfer service. While traditionally, banks have been the most preferred option, in today’s times, they have lost their appeal. High service costs, lack of transparency, and unnecessary delays are to be blamed.
In this resource article, we are going to cover how one should receive large payments from abroad. We will list down some reasons why designated service providers in the international money transfer scene are becoming popular. If you are a student or a working professional that sends money back home, you should check out what we have to say on the topic.
Major Problems with International Money Transfers
In this section, we are going to outline some of the problems that are associated with international money transfers.
1. Hidden Charges and Fees-
When someone is looking to make any payment from abroad, the first thing that they worry about is hidden charges and fees. No matter what kind of percentage or commission rates they mention on their website, the final amount that gets debited is always less. They cite rules like changes in rates from Central Banks to justify the hidden charges. This is one of the worst problems in the international money transfer ecosystem.
2. The discrepancy in Exchange Rates-
Banks and payment providers never go by the exchange rate for the day. They have their own calculations which they impose on importers and exporters unequivocally. In most instances, traditional financial institutions are not only looking at protecting their own interests but generating sizable profits from foreign exchange currency conversions. There is always a huge premium that is charged over and above the normal foreign exchange conversion rate.
3. Payment Tracking Issues and Problems-
One of the many grey areas in international money transfers is the lack of payment tracking. If you are receiving money from abroad, you, unfortunately, have no option or mechanism to tell you when your payment is arriving. Since it passes through several official channels, there is no way to tell when the same will get credited to your account. This is a major problem.
4. Frauds and Cheating in Transfers-
Given the global nature of the business ecosystem, businesses might not even speak to each other or meet physically, even when they are doing millions of dollars in business. This has resulted in the presence of many instances of fraudulent activities where importers or exporters have been cheated and no money transfers have taken place.
5. Increased Time for Verification and Processing-
With different countries having different rules and regulations governing international transfer, the same results in delays and red tape. You can imagine that delays can be a major problem for a business, especially since they can affect cash flows. Volatility in foreign exchange markets can present vulnerabilities to businesses that do not deal in major margins.
Whether you are a freelancer or a small business, even if you use an established name like PayPal for international money transfers, you stand to lose 5% on currency conversion costs.
The same holds true for debit card transfers as well. Yes, there is an option of using your bank accounts for the same, but here too, you are looking at a minimum fee of 3%. This three percent can prove to be a major deal for a business whose profit margins are not that great.
Are Designated Service Providers a Worthy Solution to the Problems?
The above problems that we have stated pertain largely to the functioning of traditional financial institutions like banks. However, to that list, we should add two more organizations or companies- Western Union and Money Gram.
While both of them were the first ones to enter the space of foreign money transfer, they have fallen out of favor with the audiences. There are two major reasons for the same-
- You need to physically visit a location or an agency from where you can collect the sum of money.
- Both these platforms use the tourist rate of exchange in currency value. This means that this is an expensive proposition and requires nearly 20% of the total transfer sum.
Due to the above reasons, designated service providers have emerged as the most credible option in international money transfers.
If you are looking to receive payment from abroad, you can choose between any of the following names that we have mentioned below-
- Wise (formerly TransferWise)
- Currencies Direct
- World Remit
Reasons why Designated Service Providers are taking over International Money Transfers
There is a reason why such designated service providers in the international money transfer scene are gaining prominence. Let us look at some of the reasons for the same-
- Firstly, all these platforms (barring one or two) do not charge exploitatively when you are looking to transfer money or receive it. Yes, they charge a fee, but it is far lower than the ones charged by banks or even Western Union (or even PayPal)!
- Secondly, the process is efficient and does not require you to jump through hoops to receive your payments from abroad. All you need is a registered and verified account and you can proceed with only your smartphone and an app.
- Thirdly, most of these platforms are proud of how transparent they are in financial dealings. For example, a platform like Wise has always prided itself in being at the forefront of a revolution that seeks to break the hegemony of the big players.
- Fourthly, international payments and transfers can be risky and be affected be affected by the conduct of cybercriminals. In this regard, it is best to work with platforms that prioritize safety and have certain inbuilt firewalls that protect your transactions.
- Lastly, they offer the best experiences on the convenience front. In fact, you do not have to deal with a human being throughout the entire process. No banks, no agency collection centres, anything. This helps in improving the experience of the recipient.
The Bottom Line
Receiving large sums of money or payments from abroad is no longer a cumbersome process, as it was some years back. The advent of designated service providers and their market penetration means that individuals and businesses do not have to worry about other intermediaries eating into their hard-earned money. If you want us to help you out in choosing the best provider for international money transfers, please let us know in the comments below.