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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
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

    Recruitment Genius: Customer Relations Officer

    £13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Jemma Gent: Project Coordinator

    £12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable