Money Insider: New providers cut cost of cash transfer abroad

 

If you've ever wanted to transfer money to another part of the world, you will have had to use one of the global banking institutions and long-established players such as Western Union and MoneyGram. But the service can be slow while the exchange rates used and fees charged give healthy profit margins to the companies concerned but represent poor value for the consumer.

A study by the World Bank three years ago highlighted the size of the profits involved, with banks charging an average 12 per cent for low-value transfers and Western Union around 9 per cent.

Fortunately the market is starting to become more competitive, and in the last 12 months we've seen some enterprising new entrants such as Azimo and CurrencyFair offering much cheaper money transfer alternatives.

Azimo recognised that migrants and UK expats abroad send billions of pounds to other countries each year and has developed an online service that allows you to send money to 125 countries.

The service gives a range of options including payment direct to bank accounts, to mobile phones or for cash collection at 150,000 locations around the world.

The minimum transfer value is £50, and users can send up to £900 without need for ID verification. Lower overheads mean that transfers via Azimo will be charged at between 1 per cent and 2 per cent compared with existing bank and wire services that frequently charge between 4 per cent and 8 per cent. Azimo claims you could save up to £30 on a £300 transfer.

Michael Kent, founder of Azimo, said: "We are here to shake up the money transfer market and how people send and receive money around the world, and as an ethical company 10 per cent of our profits go directly to charity."

Another new player is CurrencyFair, an online peer-to-peer marketplace which matches currency exchange demands.It cuts out the hefty bank margins and results in customers having access to exchange rates very close to the wholesale rate.

Even though banks often offer 'free' international money transfers or 0 per cent commission, the loading on the exchange rate is often a stealth charge and the mechanism used to make a tidy profit on these transactions. CurrencyFair recently analysed the exchange rate mark-up used for a transfer of £5000 into euros and found that the big high street banks charged a margin which added between £165 and £235 to the cost of the transaction, whereas the extra cost through CurrencyFair was just £30.

These new companies have lower overheads than the bigger players and are able to pass on further cost savings by offering a direct service and cutting out some of the middlemen.

In much the same way that peer to peer lending is slowly starting to nibble away at the UK savings and borrowing market, these new money transfer alternatives will appeal to the growing number of price conscious consumers looking to embrace new technology to obtain a cheaper deal when sending money overseas.

Low-cost chance to clear overdrafts

Activity in the credit-card market has picked up over the past couple of weeks, and among the latest new deals MBNA has launched a Fluid-branded credit card.

The card offers 0 per cent on balance transfers for 15 months, falling short of a number of deals where you can get a up to 22 months free. However it does come with a much lower balance transfer fee of 1.5 per cent. After the 0 per cent promotional period expires, the rate reverts to 15.9 per cent APR representative – well below the market average of 18.3 per cent.

The interesting feature is that you can make a transfer from your plastic to your current account and still get 15 months' interest free. There is a hefty one-off 4 per cent fee if you want to take advantage of this, but it could be worth paying if you're looking to repay expensive overdraft borrowing.

For example, if you transfer £1,500 to the card to clear an overdraft with an interest rate of 18.9 per cent, you would pay a one-off balance transfer fee of £60, but over 15 months you would save £354 in overdraft interest charges. Also if you set up a standing order to repay the card balance at £100 per month, you will be debt-free by the time the introductory deal comes to an end.

If your credit record is clean and you are disciplined with your finances, this is a really smart way to use a credit card to your advantage get your bank balance back in the black once and for all.

 

Independent partners: Bank-beating exchange rates and no hidden fees on all your international payments. Find out more

 

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
News
Patrick Stewart in the classiest ice bucket to date
people
News
Australian rapper Iggy Azalea was left red faced but, thankfully, unhurt after taking a few too many steps backwards, sending her tumbling off the stage.
peopleIggy Azalea was left red faced but apparently unhurt after taking a few too many steps backwards
News
newsComedian Lee Hurst started trend with first tweet using the hashtag
News
The current recommendation from Britain's Chief Medical Officer, is that people refrain from drinking on at least two days a week
food + drinkTheory is that hangovers are caused by methanol poisoning
PROMOTED VIDEO
Life and Style
A nearly completed RoboThespian robot inside the Engineered Arts workshop is tested in Penryn, England. The Cornish company, operating from an industrial unit near Falmouth, is the world's only maker of commercially available life sized humanoid robots
techSuper-intelligent robots could decide destroying the human race is the kindest thing to do
News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
News
newsRyan Crighton goes in search of the capo dei capi
Life and Style
techConcept would see planes coated in layer of micro-sensors and able to sense wear and tear
Life and Style
Customers can get their caffeine fix on the move
food + drink
Extras
indybest

Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Software Developer (Java /C# Programmer)- London

    £30000 - £45000 per annum: Harrington Starr: A global investment management fi...

    Senior Network Engineer-(CCIE, CCNP, Cisco, London)

    £65000 - £75000 per annum: Harrington Starr: Senior Network Engineer-(CCIE, CC...

    Senior Network Analyst - (CCIE, Cisco, CISSP)

    £70000 - £80000 per annum: Harrington Starr: Senior Network Analyst - (CCIE, C...

    Senior Network Engineer-(Design, Implementation, CCIE)

    £60000 - £80000 per annum: Harrington Starr: Senior Network Engineer-(Design, ...

    Day In a Page

    All this talk of an ‘apocalyptic’ threat is simply childish

    Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

    Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
    Mafia Dons: is the Camorra in control of the Granite City?

    Mafia Dons: is the Camorra in control of the Granite City?

    So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Once the poor relation, the awards show now has the top stars and boasts the best drama
    What happens to African migrants once they land in Italy during the summer?

    What happens to migrants once they land in Italy?

    Memphis Barker follows their trail through southern Europe
    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
    Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

    Frank Mugisha: 'Coming out was a gradual process '

    Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
    Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

    Radio 1’s new top ten

    The ‘vloggers’ signed up to find twentysomething audience
    David Abraham: Big ideas for the small screen

    David Abraham: Big ideas for the small screen

    A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
    Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

    Florence Knight's perfect picnic

    Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
    Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

    Horst P Horst comes to the V&A

    The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
    Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

    Mark Hix's summery soups

    Soup isn’t just about comforting broths and steaming hot bowls...
    Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

    Tim Sherwood column

    I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
    Tim Howard: I’m an old dog. I don’t get too excited

    Tim Howard: I’m an old dog. I don’t get too excited

    The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
    Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

    Tom Peck on Match of the Day at 50

    The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition