Even the former U.N secretary, Kofi Annan, has investigated the topic and concluded that foreign exchange companies extort unreasonably high fees for their cash transfer services. Banks are also highly expensive in that regard, and take a toll on those who decide to receive payments to their bank account. Their wire fees alone (ranging between $20-$40 in the USA, or Euro-equivalent in Europe) make it extremely expensive to send out small payments abroad.
There are several companies trying to solve this through different means:
1. Payoneer
Payoneer is a great solution, as they enable employees to withdraw their salaries in cash via Prepaid MasterCard cards. Payoneer has several types of fees. You can see them quickly listed below:
- ATM withdrawal fee.
- Currency conversion fee (not fixed and may vary between different currencies).
- A surcharge imposed by the owner of the ATM you are using (this is not directly related to Payoneer, but imposed by the ATM provider). The Monthly fee is charged at the beginning of each month but If your account has no money and for the whole month you have $0.00, you will not be charged for that month. As you can see there are a lot of fees and to better understand them, be sure to check the detailed info for each on your Payoneer Account and select the “Pricing & Fees” tab located under the “Help” menu, because it varies so much depending on the country and currency.
2. Bitcoin
Ever since its creation, Bitcoin has been seen as the solution to all the money transfers and the death of traditional banking. And even though the principle behind it sounds too good to not be implemented, it has seen many years go by and still used by few. The main problem with it, as a currency, is the fact that it’s too volatile and can’t be paired with many traditional currencies. Being volatile means huge losses if it goes down and this exactly why it has decreased in trading, let alone for overseas payments. As you can see in this article, the evolution in value has been so chaotic that it is virtually unreliable (In 2013 the Bitcoin had a value of the approximate amount of $1,000, and in 2015 grew from $250 to $500 in a matter of days, and in the same rapid fashion it gone down to $300 in the very same year).
3. Commercial money transfers
World Remit is a new contender that is geared towards remittances. It enables cash withdrawal at multiple locations across the globe, while charging fixed fees of 2-3% of the transfer value. It has been getting tremendous interest from investors and has managed to raise more than $100m in its latest funding round. Currencies Direct is a more established company in the field which is already transferring billions of dollars each year. They trade with 24 international currencies, including the Rupee, and also have offices in Mumbai. They offer fee-free transfers and enable sending money abroad for cheap for both immigrants, small business owners, and sole traders (only bank to bank wire transfers though). To summarize, there’s a multitude of options to avoid the high fees incurred by remittances providers and banks. None of them is “easy”, else everyone would have used them, but they can help individuals and companies who are providing offshore service make more money at the end of each month, and thus, worth the hassle.
