Traditionally, internal money transfers and currency exchange have been very expensive, with banks and traditional money transfer companies charging up to eight per cent or more in fees. For large money transfers, these fees add up quickly. Even worse, traditional transfers are slow, as these businesses were high risk and required multiple transactions to complete. Worse again, no bank could provide transparency about where and when the customer’s money was along the route, until it showed up in the final account.
This allowed some new players, including Revolut to undercut existing operators. Revolut offered customers one free international transfer per month. Two Estonians built a company originally called TransferWise (now called Wise) by netting each other’s money transfer requirements, circumventing the laborious process of bouncing money across several banks with each taking a cut. It is now valued upwards of $10 billion.
Financial technology companies in this category are offering faster and less expensive international money transfers. Where a bank can take days to transfer money, the Fintech applications can deliver results in considerably shorter time. They also allow for different payment modes and multiple platforms, and there are even some companies that don’t charge fees. There is the added benefit of increasing transparency as customers, whether they are sending or receiving funds, are kept in the loop and are provided with real-time updates.