How to transfer money internationally for cheap in 2022

Sending money abroad has long been easy to do – much like sending money domestically. The main issues arise when either there are policy limitations, such as country bans due to money laundering concerns, or when handling exotic currency. However, the SWIFT payments that your local bank is facilitating are often extortionate – and not all that convenient anyway, with long waiting times and awkwardly long processes of setting up overseas beneficiaries. For an in-depth look at how to overcome this, read this money transfers guide.

For context, the corresponding bank fee for Lloyd’s, one of the Big Four banks in the UK, charges a flat fee of £20 for sending money to most of the world. Bank of America, on the other hand, charges $45 for international wire transfers sent in USD. This makes sending small amounts of cash unviable and even medium amounts of cash very expensive.

However, it gets worse. The Bank of America allegedly uses a 5%-7% exchange rate margin for such international wire transfers. This is not only unacceptable levels of price gouging but would render any investment or business using it unprofitable. The reason for referring to this figure as “allegedly” highlights another issue – there is no transparent, clear exchange rate margin, which is likely how banks get away with it. Customers would leave an FX broker in a heartbeat for charging even 4%, yet customers may be tied into using Bank of America because of an existing mortgage, loans, and so on.

3 ways to transfer money internationally for cheap

Here are three alternatives to using a bank when sending money overseas.

P2P Transfers and Online FX Specialists

P2P transfers are very different from SWIFT and wire transfers. Instead of literally sending the money overseas to a different bank account, the P2P transfer just matches a buyer of a currency to a seller. Then, it’s a matter of making this currency exchange simultaneously, meaning the two parties receive the cash they’re looking for, but it was never actually their money being sent to one another.

This works best with huge P2P specialists like Wise and CurrencyFair, where they have so many accounts and users that it’s reasonably easy to match up buyers and sellers of a currency, almost like they’re depositing/withdrawing into their accounts simultaneously. This kind of internal transfer of money is hyper-efficient and understandably incurs fewer costs – often leading to free international money transfers.

Wise and such do have the capability of facilitating payments through other means, like SWIFT, in order to keep customers happy during a time when no P2P payment can be made. But because of the smooth user experience of these apps and the transparent and upfront pricing, the inner workings and the way the money is transferred are not important – it just works, and it’s the best way to transfer money abroad for cheap.

This is why companies that use P2P transfers are not their own category – they merge with other startups and online companies that facilitate payments through apps and websites. Generally, automation is cheaper than services that require manual work and labor, which is why many online money transfer firms are charging less than 1% in fees + exchange markup combined.

Remittance Companies

Remittance firms we can consider to be companies such as World Remit and Remitly. These companies are highly professional and experienced when it comes to transferring money overseas – not just exchanging your currency between your multi-currency accounts. Generally, these companies offer a free dedicated dealer over the phone, have expert advice when it comes to business and investment remittance, and can even facilitate hedging.

These are often a good choice for larger transfers, as they’re highly secure and often have beneficial rates the greater the transfer value is. However, whilst they’re a cheap way to transfer money abroad, they’re not as convenient as the online FX specialists.

Cryptocurrency

The very foundation of crypto lends itself to the idea of breaking down national borders and having a universal-yet-decentralized system of exchange. Furthermore, sending money from one Bitcoin wallet to another Bitcoin wallet is not just free, but no exchange is required in the sense that it’s a universal currency – both the recipient and sender are potentially using the same coin.

However, given that crypto is yet to become any major economy’s base currency (besides El Salvador), nor is it totally integrated into e-commerce and our day-to-day lives, we likely are exchanging our fiat for our crypto before sending, and the recipient is likely exchanging their crypto to fiat on the other end (at some point). Now we are in the same predicament as any other FX exchange, where we must hope the broker has low fees and low exchange rate margins. These fees are similar to FX brokers, if not more expensive (because of less liquidity/volume), plus the exchange may be occurring on both ends to bring it back to fiat base currency. Plus, using an exchange to send the crypto usually incurs a transaction fee.