Money transfer fintech TransferWise gets restricted banking licence from APRA

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. 

Bank vs fintech: which is the cheaper money transfer option? 

When it comes to sending money overseas, you’ll generally find that fintech IMT specialists offer cheaper exchange rates and less fees than the big banks - even without a PPF licence under their belt. 

Mozo data shows for instance that if you’re transferring AU$5,000 to the US, you’ll end up with $144 more USD if you went with the average online specialist rate today rather than the average big bank rate today. 

Why not see for yourself? To find the best money transfer deal for you, weigh up a few competitive offers from these online specialists.