While the evolution of e-banking has given both individuals and businesses the opportunity to send their money across the world quickly and safely, the traditional methods of making global payments online are still plagued with the prevalence of hidden fees and charges.
While high fees for international payments are still an issue facing consumers wishing to get their money to wherever it is needed, the more critical concern is one of transparency:
“The current industry standard allows for opaque pricing, which obscures unfavorable currency conversion rates, hides the real cost to the consumer and makes it almost impossible for the consumer to ‘comparison-shop’”. – Consumers International
Without complete service transparency and a full breakdown of pricing, transactional fees and exchange rates involved, it’s often difficult to know which service to trust. From the individual, sending money back to their family, to the business making thousands of global payments per month, it’s vital to know upfront how much it will cost to get your money to its intended recipient, and how much of the intended amount will arrive.
Traditional International Payment Services
Bank transfer: 85% of international transactions are still being carried out by banks, mainly due to consumer trust in their security as well as a lack of knowledge regarding viable alternatives. While big banks offer reliable service and can usually facilitate payments in any required currency, their main drawback is the significant fees that they levy on each transaction, often without the availability of clear and precise information prior to agreement.
From flat rate transfer charges and overseas banks receiving fees to more obscure charges like Anti-Money Laundering costs, the overall fees that a bank charges can quickly add up depending on the size and complexity of the payment involved. Standard payment fees can go as high as £20-25 and even those banks who offer “commission-free” transaction options can make between a 5-7% margin due to their loaded exchange rates.
Ultimately, the accumulation of these hidden fees mean that traditional banks can charge anywhere between 4% and a whopping 15% for sending money abroad.
Transfer Operators : Bank transfers usually take a couple of days to process so those who don’t have the luxury of time and need their global payments processed as fast as possible often turn to transfer operators such as MoneyGram and Western Union.
These services have the benefit of allowing you to make a transfer that will be completed within a matter of minutes but the price for using this option is high. While there are no transparently set fees (every transaction is calculated depending on factors such as the money’s destination, country of origin, branch or online payment, etc) consumers should expect to pay anywhere between 7-12% for the service.
Foreign Exchange Broker: For larger transactions (amounts over 1000 GBP, for example) foreign exchange brokers are usually able to offer better exchange rates than the high street banks with fees that are between 3-4% lower.
However, despite the cheaper fees, many FX brokers still exhibit a similar lack of transparency demonstrated by the banks and transfer operators by hiding their fees in the spread.
Emerging Financial Tech Solutions
Time and again, individual consumers and businesses are frustrated by the lengthy waiting times and lack of transparency associated with traditional global payment methods. Fortunately, technological solutions such as Currencycloud’s automated Payment Engine are powering next generation businesses to address both of those major issues to make by allowing international online payments to be faster, fairer and easier.
Payments businesses like Azimo, MANGOPAY and Fidor Bank have access to cloud-based services that fully automate the payment lifecycle – from receipt of funds through conversion and payment – using a single, innovative engine, eliminating the potential for costly manual errors and offering simple, transparent and fast transactions.
This means that, instead of springing surprise fees and unfair exchange rates to the end customer when converting and sending payments, these firms can pass on the wholesale exchange rate and charge a simple and explicit fee. The customer benefits from great rates and knows exactly what they are paying for the service.
Making it easy for the end customer is equally important, which is the main reason for the rising popularity of API (Application Programming Interface) technology. Our clients embed our network’s capabilities into their own user interface, allowing them to deliver a comprehensive international payment service and control the customer experience.
Moving money around the world doesn’t have to be hard (or come with hidden fees), but there remains a long way to go before it is as easy as it should be.