There's a couple of ways to move cash around the world. Some of it involves brokerage accounts, some of it involves carrying drug-dealer levels of money onto a plane.
TransferWise is a London-based fintech company founded in 2011 by Kristo Käärmann and Taavet Hinrikus who clearly realized what a pain it was to move money around internationally. Compared to more traditional services, TransferWise is the easiest way to move money around I've ever seen, even though there are other great, lower-cost alternatives like Charles Schwab.
But to get the full story, this one requires crunching the numbers.
The process of sending money
TransferWise is great at connecting whatever accounts you may already have. This is done by creating an account—easily done by authorizing a Google, Facebook or PayPal account—and logging into your bank's online account to link up any specific accounts you may have.
To send money to another person, it will require the recipient's account number, email and address.
The process is straightforward: TransferWise guarantees an exchange rate for 24 hours once a transfer is initiated, and will estimate how long the process will take. For the $1,500 USD to NZD transfer we used, TransferWise estimated it would take two to three business days for the transaction to take place from a Chase account to an ANZ account.
TransferWise does take a decent fee in order to facilitate transactions. In an effort to break the U.S. market, the fintech company recently has been offering fee-free transactions up to $600 for first-time users that sign up through a referral code.
Since our transfer was larger than $600, the fee only applied to the remaining $1100, but the referral reduced the fee down to $8.60 from $14.85. That's $6.25 in savings.
Nicely, as well, the transaction was fairly seamless and speedy. The initial transaction was requested Thursday, February 23 at 3:11 pm EST with a estimated arrival for Monday, February 27. The money was deposited much earlier, on Friday, February 24 at 6:41 pm NZST (or 12:41 am EST).
There are also 38 currencies supported with the majority of them supported through the online interface, not the Facebook messenger bot.
(Last week, the company announced the ability to send money through Facebook, caveat being only seven currencies outside the U.S. dollar are supported. The messenger bot does offer the neat trick of being able to track rate fluctuations, but it seems like a weird ancillary feature.)
Here's the full list of supported currencies:
Facebook Messenger Bot: AUD, CAD, CHF, EUR, GBP, HUF, PLN, USD.
Website: AED, AUD, BDT, BGN, BRL, CAD, CHF, CLP, CNY, COP, CZK, DKK, EUR, GBP, GEL, HKD, HRK, HUF, IDR, INR, JPY, KRW, LKR, MAD, MYR, NOK, NZD, PHP, PKR, PLN, RON, RUB, SEK, THB, TRY, UAH, VND, ZAR
How does TransferWise's exchange rates compare?
Sometimes banks and services conduct transactions at different exchange rates other than the real-time rate to quickly build a profit over very small margins.
There's no definitive service that provides the most accurate rate, though XE and Oanda tend to be most well regarded. (Google and Google Finance relies on SIX Financial Information and Coinbase to provide their currency information. The company estimates the results are delayed by three minutes.)
|TransferWise (without fee)1||$2,086.23||1.39082|
|TransferWise (promotional fee)2||$2,061.08||1.37405|
|TransferWise (with normal fee)3||$2,051.60||1.36773|
Even without a fee, TransferWise rate came in below XE and Oanda, while Oanda had the highest rate, but there was only a 30 NZD cent difference between the two. That's comparable, and certainly lives up to the claim that TransferWise only conducts business with real-time rates.
It's not a negligible enough difference to matter, though it's worth noting the fee reduces the exchange rate by three cents, which do add up over larger amounts.
Use the official calculator widget to see how much a transaction would cost:
How it compares to other banks and services
Five years ago, we compared the cost of transferring money using two banks, Bank of America and Charles Schwab. Schwab proved to have the most competitive rate, taking a 0.1% spread while Bank of America took a 4.4% spread into a Hong Kong HSBC account.
On the promotional transfer, which waives fees up to a $600 limit, TransferWise took a $8.60 USD transaction fee out of a $1,500 USD transaction. This works out to a 0.5% spread.
On the non-promotional transfer, in which all normal fees were charged, TransferWise notified me it would take a $14.85 USD fee out of a $1,500 USD fee. This works out to almost double the spread of the promotional transfer, bumping that up to a 0.9% spread.
Though the spread isn't quite as great as Schwab's, TransferWise's fees can be relatively competitive depending on the amount of money moved and is a far, far easier process than going through the typical transfer process, which requires going through brokerage account without incurring fees.
The promotional transfer was 400% more expensive than Schwab's spread (normal transactions would be 800% more expensive). In comparison, Bank of America charged 389-780% more than TransferWise.
(Ease of use does come at a price. Moving money through the Schwab brokerage account often requires looking up partner banks in the appropriate currency, moving the money through the brokerage account to avoid the fees, and sometimes confirming with a rep manually. Once the money is in the brokerage account, it can then be moved to the checking account or to the external account. This is not the same as using the foreign wire.)
Customer service was pretty good, too.
Both times we contacted TransferWise, the wait was minimal, service was efficient and the situation was resolved. The first time we contacted them we realized we had made the first transaction in error before applying the referral code. The representative was able to apply it instantly by looking up the member's email address and name who had suggested it to us.
In other words, nothing but good things to say in this regard, and so far, so good, for now. It'll be interesting to see how TransferWise's competitor, Revolut, holds up against it eventually.