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%.
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.
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 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.”
Ecommerce has been this year’s big success story for Australian businesses, with many seeing their sales bounce back thanks to record-high numbers of people shopping online.Yet, as promising as the domestic eCommerce market looks right now, new data suggests your business could make even greater gains by going international.International money transfer (IMT) specialist OFX reported that revenue for its online clients selling overseas jumped a massive 41% last month, compared to a year ago.Their total volume of goods sold was also significantly higher this November than the last - up 51% from a year ago. OFX’s strategic partnerships director for eCommerce, Edward Wiley says these businesses have mainly benefitted from a COVID-induced growth in online sales, not just here in Australia but in other larger countries like the US too. For comparison, Australia’s eCommerce market is forecasted to hit US$27.2 billion by the year’s end, whereas the US’s is projected to reach a much higher US$431.6 billion, according to analytics company Statisca. “Australian businesses are doing really well but some of them might be missing out on this once-in-a-lifetime opportunity to expand internationally and catch that kind of [global] market share while everyone is moving to buying online,” Wiley says.
The Australian dollar yesterday broke past 74 US cents and hit its highest level since August 2018.US dollar weakness and an uptick in domestic economic activity have helped to prop up the Aussie dollar and right now the AUD is trading at around 74.1 US cents. This comes after Wednesday’s release of Australian Bureau of Statistics data which indicated Australia’s economy is bouncing back. Our gross domestic product (GDP) in the September quarter is up 3.3%, thanks to COVID-19 restrictions easing across most of the country (although GDP is still 3.8% lower than a year ago). This sentiment of cautious optimism was also reflected in Reserve Bank Governor Phillp Lowe’s statements on Tuesday, following the latest RBA meeting. “The positive news on vaccines has boosted equity markets, lowered risk premiums and supported further increases in some commodity prices. The improvement in risk sentiment has also been associated with a depreciation of the US dollar and an appreciation of the Australian dollar,” he said. “In Australia, the economic recovery is under way and recent data have generally been better than expected. This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support.” A lower Aussie dollar makes Australian exports cheaper and more attractive to overseas buyers, so a stronger AUD isn’t ideal for improving the GDP. But the strong Aussie dollar right now is beneficial for anyone looking to transfer money overseas from Australia to the US. It means the currency market has moved in your favour and you can potentially get more USDs for the same amount of AUDs sent. Remember though, that even if the market is looking favourable for you, different bank and foreign exchange (FX) specialist providers will still charge their own margins and fees on top. So it’s a good idea to shop around regardless. That way you can find the cheapest deals for your money transfer. Compare a few competitive exchange rates in the table below or jump over to our international money transfers hub for even more options. Not sending money overseas just yet? Look out for a feature known as a forward contract (offered by many FX specialists). This tool allows you to secure today’s rate for a transfer in the future, sometimes up to two years in advance.
International money transfer fintech, TransferWise has hit a major milestone, as it becomes the first company in over ten years to receive a restricted banking licence as a purchased payment facility (PPF) provider. For context, gift cards, loyalty cards and travel cards are all examples of PPFs, as they involve the provider making payments to others on behalf of the user. The Australian Prudential Regulation Authority’s decision to grant TransferWise a PPF licence this week means it’s now considered a ‘limited authorised deposit-taking institution’ (ADI). So what’s the significance of this new label? Simply put, it gives TransferWise direct access to Australia’s real-time payments system, known as the New Payments Platform.Currently, direct access to the New Payments Platform is only available to ADIs or banks, so fintechs without ADI status still have to pay third-party intermediaries to gain access.But thanks to APRA’s decision to open up that exclusivity to TransferWise, the fintech will no longer need to rely on those intermediaries, bringing down their wholesale banking costs.TransferWise says that as a result, it’s yet another step closer to providing instant international money transfers to Australians at a lower cost. “By becoming independent and cutting out the middleman, we’ll be able to save our customers even more money and time in the process,” TransferWise Australia’s country manager, Tim Cameron said. As a point of comparison, after being granted the PPF-equivalent licence in the UK, TransferWise said it was able to make transfers to and from the UK in under 20 seconds and cut its pricing by nearly 30%. To date, PayPal is the only other player that holds a PPF licence. However, this is somewhat a bittersweet win for TransferWise, as the PPF licence category will soon be updated with a Stored-value Facility regime to account for the rise of digital wallet payments. It’s not yet clear whether the new regime will cover direct access to the New Payments Platform.
As anyone with loved ones overseas can attest to, spending Christmas away from family is tough. But with travel bans and border closures still in place, that may be the reality for many Australians this year. Still, there’s no need to hit ‘cancel’ on celebrations just yet. Besides navigating time zones to Skype call your nan or sister on Christmas Day, if you’re looking to treat your loved ones to something extra special this festive season, cash is a popular gift option. Given the convenience, speed and low cost of international money transfers, it’s little surprise that they’ve become an attractive avenue for migrants looking to support - or in this case, pleasantly surprise - family back home. In fact, in 2019, Australians sent a whopping $7.44 billion across the globe according to the World Bank. But before you send off your first batch of cash, it’s worth doing your research on things like how to pick the right provider for your transfer and the biggest traps you’ll want to avoid. To keep you in the know, we’ve answered some of the burning questions you might have about Christmas money transfers below.
Exchange rates are looking favourable for Australians sending money overseas as the Aussie dollar rose off the back of US election results. Right now, the AUD is trading just below 73 US cents, according to the XE Currency Converter - up from around 71 US cents at the start of election week. This is the first time since mid-September that the currency has broken past 72.5 US cents. While the gap between US$0.71 and US$0.73 seems almost negligible, for larger international money transfers (IMT), this could be a difference of hundreds of dollars.IMT provider OFX’s senior corporate manager, Matt Richardson said Joe Biden winning the presidency boosted the market appetite for risk (known as ‘risk on’ sentiment). As a result, investors flocked to purchase stocks and high-yield currencies like the AUD, raising the value of these riskier assets. “The democrat led government is expected to implement significant Coronavirus relief programs and alleviate tensions with key global allies, creating a ‘risk on’ environment across financial markets,” Richardson said. “The Australian dollar has advanced against a basket of major counterparts in the midst of [this] ‘risk on’ move, creating an opportune time for those settling costs overseas to reduce the AUD expenditure or maximise their foreign currency return.“Conversely those sending funds back down under [would] suffer a higher cost or smaller return on the back to the AUD appreciation.” In other words, bigger savings are now on the table for individuals and businesses sending funds from Australia to countries like the US and the UK, thanks to stronger AUD/USD and AUD/GBP exchange rates. But you may lose out if instead you’re moving money from the US and UK to Australia.