Banks Are Losing Their Market Share on Large Amount Money Transfers

For a very long time, the big banks seemed almost untouchable. They towered monolithically holding the monopoly on pretty much all things finance, ranging from credit cards, to high volume money transfers, to international payments. But the times they are-a-changing and steadily but surely, a whole host of innovative companies are now chipping away at their market shares.

In this post we will look at how the banks are no longer the only way to handle large international money transfers or overseas business payments. We look at the best way to transfer money abroad cheaply and will also introduce some innovative companies and startups who can better help customers transferring large amounts abroad.

Who Is Transferring Large Amounts Abroad?

We live in an increasingly cosmopolitan world. The march of globalisation has been relentless and our lives and economies are more entwined than ever, no matter where you live. Accordingly, more and more money is flowing across borders and into foreign currencies than ever before. Don’t believe me? Let’s take a look at some of the people and organisations who find themselves making large international payments at various points.

• Vacationers

If you ever decide to book a luxury villa in Mexico for a vacation (and there are some gorgeous ones in Tulum), you may find yourself needing to pay over $1k to the owner’s bank account in Mexico City (unless you book via platform who will jack up the price). Whilst $1k may not seem all that large an amount to some of you out there, your bank will treat it as one.

• Expats and Immigrants

Most people who move to a new country, still have ties back home. Whether it’s family, business or simply the bureaucracy of citizenship, sooner or later every expat will find themselves transacting back in the old country. It may be that they want to send money back to their family, or it may be that they wish to transfer their pension pot to their new bank (a British pension goes a lot further in Southeast Asia than it does in Southend-on-Sea…).

• Corporations

It probably goes without saying that corporations deal internationally on a daily basis. Many corporations serve multiple foreign markets and others simply “offshore” some of their operations to save costs. As such the big corporations need to be very mindful about when and who they move money around the world.

• Small To Medium Enterprises

But it isn’t just the corporations who do this. These days even the most humble of SME’s may well find itself doing business abroad. For example, a boutique restaurant may source its wine directly from an Italian vineyard or a cutting edge fashion designer may get a wholesale order from a store in New York. This means sending and receiving large sums of money abroad.

• Online Sellers

Whilst a lot of online sellers deal in piecemeal, small transactions, some do offer bulk sales and others simply buy their wares in large volume from cheaper markets like China. Therefore even DIY Etsy and eBay sellers are making large international payments in 2022!

Using The Banks To Make Large International Money Transfers

I get it. If you need to send money abroad, your instinct is probably to go via your bank. Afterall, you just get the recipient’s details, call your bank’s international payment team and they will take care of it. In fact some of you may not even know there are alternatives.

But, whenever you use the banks for this, they use it as an opportunity to make bank. When banks handle any international payment they levy a transaction fee. In the case of UK banks, this fee varies from the mildly annoying amount of £2.75 with HSBC, to the eye wateringly insane figure of £15 via Lloyds Banking Group.

In the US the tiers of fees tend to be a bit more complicated with more variances depending on the specifics of the transaction. However, Bank of America charges $45 to make an international non-USD payment (and most international payments are by their nature non-USD) and the aggregated average is about $40.

Aside from the up-front transaction fees, the banks also like to make money on the exchange rate too. For example, if you need to send €5000 Euros to a relative or business partner in Naples, you might expect your bank to change or “sell” you the Euro’s using the current market rate which is $5497.27. However, they won’t offer that and will instead use their own “marked-up” rate which allows them to make a little profit. The bank’s rates change daily but it is not uncommon for them to seek a mark-up of 3% to 5% which could mean they “charge” you $5662.27 for those €5000 and then add the $40 transaction fee on the top!

Finally, the recipient’s bank will also charge a transaction fee too and depending on what agreement you have with the sender, they may expect you to pay this.

As well as being expensive, the bank’s service also leaves a lot to be desired. Firstly, a lot of banks don’t allow international payments to be done online or via the app, and instead insist that customers either visit a branch or call them which can mean hours wasted in transit or on hold. Furthermore the SWIFT international banking system is extensive and was once quite impressive but these days it is looking rather slow. In fact some international payments done via the banks can take several days to arrive in the recipient’s account.

What Is The Best Way to Transfer Money Abroad

As we said at the start of this piece, the good news is that the banks’ days of hegemony are over and in these exciting times there are much better ways to send or receive money from abroad.

• Business FX Services – Best For Overseas Business Payments

Any business that deals internationally has the option of seeking out a specialist and dedicated business fx (Foreign Exchange) service. Business FX providers can help businesses to maximise their foreign exchange transactions by providing personalised, tailored “per transaction” advice. Many business fx services also offer currency broker facilities and can sometimes help a business get a “better than” market rate on large international transfers.

• Online Money Transfers – Best For High Volume Money Transfers

Online money transfer services like Wise or other ones listed on moneytransfercopmarison.com offer fast, cheap, and effective service, when it comes to international money transfers. They really come into their own for large international transfers. Fees are usually in the cents or the pence rather than the pound or dollar and the transfers take seconds rather than hours or days. The only downside is that the exchange rates are not always the best available. Ultimately these services are great for small amounts or lay-people rather than business.

• Multi-currency Accounts – Best For Expats

Multi currency accounts allow the account holder to keep a balance in a number of currencies. For example an expat American living in Thailand could have both a USD and Thai Baht balance. The advantage is that they don’t need to worry about fluctuating exchange rates or on losing out due to banks forex “mark-ups”. Of course, if an account holder wishes to send either currency internationally a transaction fee will still apply.

Final Thoughts

As you have now seen, transferring large amounts abroad and making large international money transfers is quite common. The good news is that overseas business payments

and high volume money transfers don’t need to cost 3-5% anymore thanks to the alternatives available – by being careful and seeking out the best way to transfer money abroad the transaction costs could be less than the price of a newspaper.

This is a Contributed Article.