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Sending money abroad? Don’t use your bank

Thousands of startups and small businesses need to send money abroad. Whether you’re paying a supplier in China or an employee in Poland, sending money with your bank is a bad idea. Here’s why:

It’s slow

Banks use a system called SWIFT (Society for Worldwide Interbank Financial Telecommunication) to move money around the world. SWIFT was pretty exciting and modern when it debuted… back in 1973. Even SWIFT’s name is misleading: transfers can take up to seven business days. Not much use to the global market that startups serve in 2019.

It’s expensive

Bank transfers are filled with hidden costs and charges:

Fee #1: The outgoing transfer fee

The outgoing transfer fee is deceptive. It’s a flat fee, stated up front. Often it appears to be the only cost associated with a bank transfer. If only that were true.

Fee #2: The exchange rate markup

The hidden cost that banks and high street money transfer providers love. A cost so well-hidden that many customers don’t even know they’re paying it. The trick is simple: state an exchange rate that’s 10-15% more expensive than the real (or mid-market) rate and then rely on the customer not knowing the difference.

Fee #3: Intermediary bank fees

Some transfers are passed between up to three other banks before reaching their destination. If this is the case, each intermediary bank is entitled to take a fee from the money that you’ve sent, leaving your recipient out of pocket.

Worse, there’s no way of knowing whether fees will apply before you send. Imagine sending £100 to somebody in a birthday card and finding out that the post office had opened the card and taken out a share of the money before delivering it. That’s exactly what banks are doing when you send money abroad.

Fee #4: Incoming transfer fee

Your money has finally arrived at its destination. Think the pain is over? Think again. Your recipient’s bank will usually charge a fee to receive the money, further reducing the final amount that appears in your recipient’s account.

What’s the alternative?

Thankfully, recent technology has empowered consumers and businesses. To avoid being ripped off, follow these easy steps:

Step 1: Check the mid-market exchange rate

Before you send, check the exchange rate with a simple Google query, such as “pound to dollar exchange rate”. Providers usually charge a small markup to cover costs, but anything more than 5% should ring alarm bells.

Step 2: Find an online provider

Online money transfer providers don’t have to pay rent on fancy high street addresses and they use new technology and automation to bring down costs. Companies like Azimo then pass on the savings to customers through better rates and lower fees.

Step 3: Ditch your bank

It’s time to end the banks’ monopoly on sending money abroad. For faster, safer money transfers, ditch your bank and go digital.

 

Azimo is a global money transfer service.

Twitter: @Azimo