If you’ve sent money overseas, you’ve probably been very confused about how it all works. To start with, the exchange rate you google is different from the one you end up getting (usually lower). And you can find yourself spending more money than you originally planned because of fees that suddenly appear. Overall, it is never quite clear what you will get until you click send.
When it comes to sending money overseas it is easy to fall into the trap of doing a transfer through your bank. However, you’ll probably end up paying more and getting a very low rate if you use a traditional bank.
If there’s one sector that the pandemic hasn’t slowed down, it’s international money transfers (IMTs). New research from the World Bank reveals that the volume of global remittances fell by only 1.6% over 2020, despite initial forecasts that it would plunge by 20%.
Using your existing bank for international money transfers might seem like the simplest and most convenient option, but did you know that using a specialist transfer provider can make the process more streamlined and considerably more cost-effective?
The past year has seen currencies and foreign exchange (FX) rates in a real state of flux as COVID-19 rocked the global economy. The Australian dollar was a perfect example of this, plunging to just 55 US cents back in March 2020 when the pandemic was declared before rebounding to highs of 70 US cents in June. Today the AUD is trading at around 77 US cents - a slight decline from its multi-year peak of 79 US cents two months ago. According to international money transfer (IMT) provider TorFX’s managing director, Nigel Fox, exchange rates will likely remain volatile for the rest of 2021. “While the world looks to be in far better shape now than it was 12 months ago thanks to the rollout of vaccination programs … there can be no doubt that some of last year’s uncertainty has bled through to 2021,” he said. “This is even before we consider the ongoing uncertainty surrounding Brexit in the UK, a new administration in the US, and the risks posed by an increasingly aggressive approach to foreign policy by China.” Fox said that for Australian businesses with international interests, whether it’s staff or suppliers overseas, this volatility could have a real impact on profit margin. “Businesses will need to tread carefully and take steps to ensure they aren’t caught out by sudden shifts in the currency market,” he said.
The British Pound has hit new highs against the US Dollar, as the UK’s leading vaccine efforts have seen more than 16 million of its residents receive the jab so far. In fact, the GBP climbed past US$1.41 today - the first time it’s reached this level since April 2018. According to international money transfer (IMT) specialist TorFX’s managing director, Nigel Fox, the speed and success of each country’s vaccination programs will have “a direct correlation on their respective currencies” this year. He says that’s why “the Pound has enjoyed an extended bullish run, with the currency propelled to multi-month and multi-year highs, on hopes the UK’s accelerated vaccine rollout will pave the way for a swift economic recovery in 2021.” For context, a ‘bullish run’ refers to a sustained rise in currency value. “The Pound is perhaps the best positioned to soar this year as the UK’s vaccine success and the eventual resolution of Brexit paves the way for a strong economic rebound,” Fox says. “In contrast, the EU’s disappointedly slow rollout of its vaccination program looks to stifle the upside potential in the Euro this year.” Interestingly, vaccine hopes and a recovering world economy could trigger even more falls in the US dollar. That’s because these positive sentiments mean investors no longer need to flee to safe currencies like the USD, as they did back in March 2020 when news of the pandemic first broke. “In the wake of unprecedented monetary stimulus from central banks and a rebound in global growth as most economies reopened, we saw a rebalancing of currency markets, with the US Dollar losing its sparkle,” Fox says. “As the world emerges from the pandemic, and with the outlook for 2021 improving, we’re likely to see the recent USD selling bias remain firmly in place.”
UK-based fintech TransferWise this week announced its decision to rebrand to ‘Wise’, in a move to reflect how it’s now expanded beyond international money transfers (IMTs).The fintech, which began operating in Australia in 2015, said its product range has since grown to meet the international banking needs of consumers and businesses by offering a “cheaper, faster and more pleasant” alternative for sending, spending, receiving and holding money overseas. “For generations, banks have been defined by borders. Traditional bank accounts trap our money in one country, making international lives more difficult and expensive than they need to be. We shouldn’t have to accept this status quo,” Wise’s chief executive officer and co-founder Kristo Käärmann said. “[This week] our name catches up with who we’re already building for - a community of people and businesses with multi-currency lives,” he added. “We’ve evolved to fix more than just money transfer.”