Cross-border Currency Exchange Just Got Way Easier and Cheaper

TransferWise operates in 60 countries and has the ability to move money between about 95% of the world’s bank accounts.


Benjamin Franklin famously said, “In this world nothing can be said to be certain, except death and taxes.” Of course he lived in a time when the banking industry was less developed than it is today. If he were here with us now, he’d feel compelled to add “and bank fees,” to his list.

It’s sad but true: Unless you keep your cash in a mattress, sooner or later you’ll be hit by bank fees. The worst part is, you may never know you’re paying them, says Kristo Käärmann, co-founder of, an online currency exchange service, which has now officially launched in Canada. Käärmann thinks he’s found a solution to at least one of these fees, namely the cost of transferring money between countries.

Some fees you see, some you don’t

Here’s how it works. Typically when you send money from one country to another, you do so via your bank. Most banks charge a fee for this service; Royal Bank, for instance, charges $13.50 to transfer up to $2,500 CDN to a foreign bank. That’s the fee they tell you about. What’s a lot less visible to the consumer is the fact that when the transfer occurs, banks do not use published, or so-called mid-market currency exchange rates such as the ones provided by Reuters. “They’ll add 5 percent,” says Käärmann, a mark-up that even “no-fee” banks charge. “Consumers have never had access to the true mid-market rate,” he points out. All banks charge these increases, but Käärmann notes that Canadian banks are hardly the worst offenders. That distinction goes to the French and Spanish banks, while Nordic banks are – in his opinion – the best. Even existing alternatives to the banks, such as PayPal’s Xoom, use non-mid-market rates to bolster the smaller fees they charge.

Beating the banks

According to Käärmann, these fees – both visible and invisible – represent big business for banks, with more than US$200 billion in revenue generated annually. Adding insult to injury, it can often take between three and five business days for the money to arrive. TransferWise aims to put a dent in this number by drastically reducing the cost and complexity of international transfers through the use of technology. Instead of co-ordinating the move of currency through the big banking system, TransferWise uses a form of peer-to-peer transaction. Essentially, the company matches up people who want to transfer money in both the sending and receiving countries and then acts as the trusted go-between to facilitate the swap. The result is that no money ever actually leaves its home country, it’s simply placed into escrow and then moved to a different account in the same country. Though the fee TransferWise charges for this service varies from currency to currency, it’s usually less than what the banks would charge. It can often take less time, especially in Europe, where money can be swapped in “as little as 17 seconds,” Käärmann says.

Almost simple setup

TransferWise has free apps for iOS or Android, but registering as a first-time user is easier on the website. You can create an account with just your email address; the personal and banking info isn’t collected until you’re ready to do your first transfer. This can be a bit frustrating if you simply want to get set up for a future transaction, but here’s a secret: You can go through the process of doing a transfer (including providing all of your banking info) then cancel the process before the final confirmation step – all of your banking info will still be saved.

The actual transfer process couldn’t be easier. The first step lets you choose the starting currency and amount, the target currency (with a real-time calculation) and an explanation of the fees and rates that apply. It even claims to show you how much you’ll be saving by using TransferWise instead of your bank, but take this value with a grain of salt. It’s based on an average, so your bank might actually be less expensive than indicated. The next steps are to provide your personal and bank info (or not, if you’ve already done this), your recipient’s name and bank info, followed by an authorization step that is handled by your bank. This authorization happens for each transfer, which is a good thing as it gives you extra peace of mind that no one has access to your money but you. That’s it.


Anyone familiar with Napster, Kazaa, or more recently, BitTorrent may cringe at the term “peer-to-peer,” thanks to the many illegal uses these platforms have been used for in the past. But TransferWise – which is backed by Sir Richard Branson and Peter Thiel – with more than 500 employees and in its fifth year of operations, is a fully regulated and licenced company. They have to be in order to link up with existing financial institutions.

Ways to pay

Consumers can of course save money on their foreign transfers; it’s especially appealing to immigrants who need to send some of the money they earn back to their families overseas. But businesses both small and large can take advantage of lower fees too. Much like PayPal, TransferWise offers users a way to request a payment, making the tool ideal for businesses that exist in one country but often do work for foreign clients, as is the case quite often in Canada.

One method that is not supported, unfortunately, is the ability to use TransferWise with credit card transactions, though Käärmann doesn’t see why retailers, restaurants and other businesses couldn’t accept TransferWise payments much as they do with credit cards today. Not only would that offer the customer the best currency exchange, it would save the business the usual transaction fee charged by the credit card company.

The CBC reports that if you want the best bang for the buck on credit card foreign exchange, look for cards that don’t charge a fee for these transactions. Amazon’s Visa (issued by Chase) offers this, as does Marriott Visa and Rogers Bank Mastercard, though the Rogers card goes one step better by offering Bank of Canada posted mid-market exchange rates instead of using Visa International’s rates, which are usually higher.

So next time you need to move money internationally, see if it makes cents to exchange your bank’s higher fees and rates, for a cheaper option.

Cross-border Currency Exchange Just Got Way Easier and Cheaper
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