What Are Money Transfer Companies And Why You Should Care?

money transfer services

Given the vast amounts of immigration, expats and holidaymakers in Australia, money transfers to and from the country are as important as they are frequent. It’s rare in this day and age that you want to exchange a single set amount of funds in cash for an entire trip, so the method of going to an exchange store is somewhat outdated. Paying unpredictable rates through ATM withdrawals, that likely incur their own fees, is also not a great option.

Fortunately for Australia, it’s an early adopter of fintech. The country has yielded the innovation that fintech has brought to the table from the very beginning. Generally speaking, Australians are quite keen to get on board with new tech, with only 16% of the country being “technophobes”.

With that in mind and a booming startup ecosystem that’s quickly rising through the ranks, ‘Silicon Beach’ is attracting global innovators. And with more challenger banks, tech payment companies and advancing P2P infrastructure, the problems surrounding Australian currency exchange are being put to bed.

What are Money Transfer Companies? How much can I save?

Money Transfer Companies are a new wave of businesses that provide remittance and currency exchange services. The underlying infrastructure is completely different from that of a bank’s, but the details aren’t necessary to know for the average user. Essentially, they use a mixture of SWIFT and P2P to facilitate sending money overseas.

The main difference to note is that they’re wholly concerned with user experience and convenience, as well as being as cheap as possible. Instead of wiring money securely but expensively as a bank would, they seldom charge any fees for their quick transfers.

Because the exchanges are so fast, and often done by juggling money through using multiple accounts instead of SWIFT, the exchange spreads are a lot less too (explained below).

Instead of going through each feature difference as a bullet point, let’s explore two scenarios of transferring money to Australia from abroad:

Scenario A: Using a bank to move to transfer currency to Australia

So you’re moving Down Under in a few months and you want to send money to an Australian bank account. The $20,000 deposit you put down on a house there, which you paid through your bank, has taken 5 days to complete. The sending fees you’re certain about ($60), but you’re unsure of the exact exchange rate difference between the bank’s and the market because it’s hidden somewhere in their fine print. After the money has gone through, it’s then discovered they took a 4% exchange spread, which means $800 of your deposit money is lost in thin airplus the $60.

Upon realising the terrible rate through a bank, you don’t want to rely on using the debit card there, so you decide to go to a currency store and swap all your money in one go. You then pay a 2%-3% margin, which is better, but you now have a bunch of cash. When you’re in Australia and want to send some money to relatives or for a previous bill in your old currency, you’re relying on the bank transfer again.

Scenario B: Using Money Transfer Companies to transfer currency to Australia

You’re moving to Australia in a few months, so you browse the different remittance companies and pick the one that has an advantage for big transfers. You decide on one that has a 1% fee but a 0% spread. You lose $200 and your money arrives the next day.

You then put your savings into a different MTC that benefits small, frequent transfers, as it has zero exchange spread. You’re relaxed about money because it has several virtual bank accounts within it for multiple currencies. At the same rate as the banks (interbank rate), you can exchange under $2000 essentially for free at the press of a button, back to your old currency, and the money sends instantly.

If you sign up to an international Money Transfer Company, can you still use them once you’ve moved Down Under?

When signing up for services, it’s always a concern whether or not you’ll be able to use them when abroad. If you’ve ever used Netflix on holiday, you’ll know what I mean. It just isn’t the same, and all your favourite shows are restricted.

Thankfully, pretty much all the best money transfer companies in Australia are compatible with being used in Australia and/or by Australian residents. It may sound obvious, seeing as these companies are dealing with international services, but it isn’t. Many countries restrict even sending money to and from the jurisdiction, let alone that country’s citizens being eligible for signing up for the service.

Other features and benefits of money transfer companies

First and foremost, for those running a business that deals overseas (either customers or suppliers), money transfer companies can make a huge difference. Selling overseas on Amazon, for example, makes you go through their exchange rates, which have a hideously large exchange spread. If you go to a money transfer company that allows you to open a collection account, you can use this for the revenue made overseas, and exchange the money yourself. Given this is exchanging revenue, not profit, it could literally be the difference between making a living and making a loss. These are aspects that you need to keep an eye on especially if you want to apply for business loans to grow your company.

Secondly, money transfer companies, unlike banks and such, are designed for one very specific service. This means that they’re experts, usually. Many companies will have a dedicated account manager, meaning you can get top-tier bespoke guidance on your exchange strategy.

Lastly, many MTCs have extra features too. Some are designed to be great payment platforms where you can have multiple virtual accounts across the world, like Tranferwise, and their app is incredibly easy to use. Others will have more specialised currency options, such as hedging products. This means in an accessible and easy way, you can lockdown exchange prices ahead of time, or purchase option contracts.

Final Word

Just like when you want your car fixed or you want to replace your house electrics, going to an expert is without any hesitation. For some reason, this isn’t the same when dealing with our other possession, our most important possession, cash. People spend more time researching mobile phone contracts than they do decide which bank to sign up to. So when it comes to dealing with currency, it’s best to stick to the specialised companies.

Which specialised company? That’s the beauty of the money transfer market right now — there’s something for everyone. There are easy-to-use apps for the sake of frequent, small exchanges, there are even borderless payment cards, but there are also other vendors that have the advantage for bigger, secure, infrequent transfers.