I interviewed Maria Iacob within the Business Beyond Borders event at the end of 2020. We discussed how you can make an international money transfers comparison. The interview was designed to show some of the options which are available to smaller companies when they start out in international business, especially if you are purchasing online or running an ecommerce business.
It isn’t looking at the more traditional instruments offered by the banking systems such as letters of credit, but is more focused on smaller value transfers. I will embed the full video below.
Who is Maria Iacob
Maria Iacob is an experienced financial advisor based in Cyprus, with a skill for explaining financial topics clearly for those of us who are not such experts. Her business philosophy is built on 3 pillars of excellence:
Excellence is born of experience.
Following over a decade spent at the trading desks (intraday Forex, Commodities, Shares, Options) and personal banking (HSBC) Maria moved onto wealth management, fintech and social investing.
Excellence is born of passion.
Maria knows from personal experience what financial loss feels like; over 3 decades ago, her family lost all of their savings due to lack of sound investment advice.
Excellence is born of preparation.
As a finance professional Maria holds several UK investment and retirement planning qualifications and MSc in Economics and International Affairs.
The Business Environment
Seldom has there been a time when the volatility of the international financial markets has been more obvious. The term “living in a VUCA world” (= volatility, uncertainty, complexity & ambiguity) has almost moved into general use with it being used to describe all kinds of uncertain situations.
During the last 2 years, businesses have seen a huge swing to buying online, and with more companies working online than every before the need for new forms of payment transfers has also increased. It seems clear that for the future smart payments will be the key, however in the meantime the options are rather overwhelming for anyone trying to make an international money transfers comparison.
In this post, we’ll be showing you the questions you need to ask yourself in order to gain clarity as to what is the best solution for your situation. Maria’s suggestion would be for you to write down the answers so that by the end you have a clearer picture of what has priority for you.
Whom are you sending money to?
The method of payment which may be possible & acceptable will vary depending on whether you are looking to remit:
- B2B (business to business)
- B2C (business to consumer)
- to governments
Governments are likely to be the most conservative recipients & this will limit your choices of how to transfer money. eg for licences, taxes etc if you are just setting up in a jurisdiction.
What amounts of money are you looking to transfer?
The options which are available to you will vary according to this. You should remember though that within US or European countries, if you are looking to transfer more than 10000 (be that in USD, EUR or GBP) then it’s likely that you will be asked to prove the source of that wealth as part of the anti-money laundering laws.
Is currency conversion required?
If you are transferring within the EURO zone (a SEPA transfer), chances are it’s going to work out cheaper than transferring between the UK & Europe or the US.
Generally you can expect the currency conversion to cost between 2.5% – 3.5%, whereby you negotiate better rates if you are transferring higher sums & more frequently.
How often do you plan to transfer money?
If it’s likely to be a one-off event then you should try to find an option that doesn’t involve any subscription fees.
If you expect to make regular transfers then it could be worth your while to look for an option with loyalty benefits to the subscription. those might include things such as referral boni, automatic payments, better exchange rates or cashback.
It’s a good idea to test any provider with a one-off payment first though to check that the user experience matches your requirements.
Also, if you don’t make such transfers very often, it’s worth checking the reviews of that provider as service levels can change over time & transferring money isn’t something you want to take chances with!
How soon will the money reach its destination?
You should note that this doesn’t always correlate with the money leaving your account, or appearing on your statement, but it’s important to know if you’re paying suppliers.
|Bank wire SEPA||1-2 bank days|
|Bank wire SWIFT||3-5 bank days (at least)|
|Direct Carrier Billing||within the hour|
What are the available options?
One of the key criteria to consider when making an international money transfers comparison is what is not only best for your location, but also what works well for your recipient.
This can vary according to the security of various methods as well as the banking infrastructure available in any given jurisdiction.
eg. US/Europe many people choose to pay with credit cards & this offers a high level of protection to both seller & buyer. However in LatAm, Brazil or Africa this isn’t a popular option (these regions tend to be “underbanked”).
In Brazil, Russia or India prepaid cards have been popular as this offers a way of ensuring that money can’t be defrauded that you don’t actually have.
China is in love with Ewallets such as Alipay or WeChat Pay. This option is also popular in India, or amongst younger people in the US, despite offering lower levels of protection.
Where are you looking to send the money?
If you’d like to check the most up to date payment preferences & statistics by region, I’d suggest you download the World Pay Global Payments Report, which is updated annually with information on both e-commerce & POS sales.
It’s fair to say that 2020 changed the way that most of the world pays for products, with a huge swing away from cash & towards contactless methods. Mostly the trends that can be seen had already begun in 2019, but were enormously accelerated by the pandemic & show no signs of return. eg most of Scandinavia is expected to be practically cashless by 2024.
You can find an overview of different payment wallets and their functionalities in the pdf of the presentation.
How much are the transfer fees?
This is a biggie & varies significantly by payment channel (“corridor”) & region.
The global average is 6.3%, with an average cost for non-digital remittance of 7.24% (ouch!) vs. 5.29% for digital payment methods (still expensive but not quite so eye wateringly so).
In general it can be said that cash is the most expensive and mobile money the cheapest when transferring money across borders.
|Send Money From||Average Cost (Q3 2020)|
This market changes really fast though so you should check with the provider each time in advance. Best place to get an objective overview of the total costs involved is the World Bank Remittance Database.
Smart Consumers Pay Less
Since 2016 the World Bank also has a so-called Smart Remittance Target Indicator (SmaRT) which lists the costs that a savvy consumer can expect in each individual payment corridor. If you’d like to geek out on the details, please: here. Basically though what this index shows is that it pays to be informed when making money transfers across borders: savvy consumers pay on average 4.17% (tendency decreasing) vs the global average of 6.3%.
Some corridors are more complicated
There are some routes where it is simply more complicated to make smart transfers. eg. US-Egypt, Ghana-Nigeria or India-Sri Lanka.
Whether New Payment Methods will be made available within the region
You should be aware that the chances of your payment going through are better in higher-income regions than say in sub-Saharan Africa.
So now what?
With all this knowledge, you can now proceed with locating a suitable payment provider. You can either:
- Check the available payment methods and relevant fees – click here (source: World Bank)
- Run a Google search using at least 4 of your answers; a list of comparison websites will be displayed
eg. Send $10,000 to Canada regular payment
- Review the list of preferred payment providers displayed in the previous slides & run a Google search using the name of the payment provider
You can find the full video here:
If you enjoy this content, please also subscribe to my YouTube channel where I plan to be a lot more active in 2022!
Some final considerations for an international money transfers comparison
On top of all the things mentioned so far, it’s also certainly worth considering the following when selecting an international payments provider:
- their global reach
- do you have a retail (private) or business a/c? (This will affect whether you are able to eg. write things off against tax or purchase without VAT)
- check the TOTAL TRANSFER COST!!! I can’t emphasise this enough!
- what are the local regulations about transfers in the jurisdictions involved?
- how is the reputation of your provider & how do they deal with complaints?
- what is their record on sustainability?
- do they frequently appear in the news with anything negative or which might affect their ability to effect your transfer on time?
As I’ve said before it’s important to both consider the whole picture (total fees, total time, reliability) as well as to remember that companies change and evolve, not always for the better! I’ve often had the best results using Wise. You can get a free transfer of up to €500 using the affiliate link below.
If you would like to download the accompanying pdf that is mentioned in the video, you can do so here:
You can find other videos from the Business Beyond Borders event here:
- Kate Isichei: internal communications strategy across borders
- Lorenzo Fornaroli: managing supply chains & logistics
- Kathrin Bussmann: Starting to Build your Brand in International Markets
- Joanne Chan: Localisation and Translation Management. Be multi market ready
- Wael Masri: Building International Business Relationships to Drive Growth
- Alexander Assouad: Managing Global Teams and Building Culture when Working across Borders
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