Thousands of UK start-ups and small businesses need to send money abroad - whether you're paying a supplier in China, or an employee in Poland. The bank is usually the first port of call for any sort of financial service but sending the money via your bank may not be the wisest option for your firm. Using an online money transfer provider could be much a better bet. Here's why.
Speed things up
Banks use an ancient system called SWIFT (Society for Worldwide Interbank Financial Telecommunication) to move money around the world. SWIFT was pretty exciting and modern when it debuted… back in 1973.
SWIFT's name is encouraging, but misleading: international transfers can take up to seven business days to arrive. That's not much use in today's fast-moving global markets.
Online money transfer providers can usually speed things right up. They may be able to deliver payment to your recipient's bank within a few days, or even in 24 hours.
Avoid the hidden costs
SWIFT transfers can be full of unexpected costs. Look out for the following charges.
1. The outgoing transfer fee
The outgoing transfer fee is deceptive. It's a flat fee, stated upfront, and it sometimes appears to be the only cost associated with a SWIFT transfer. If only that were true.
2. The exchange rate mark-up
The hidden cost that banks and high-street money transfer providers love, the exchange rate mark-up is so well-hidden that many customers don't even know they're paying it.
The trick is simple: state an exchange rate that's 10-15% more expensive than the real (or mid-market) rate, and then rely on the customer not knowing the difference.
3. Intermediary bank fees
Some transfers are passed through up to three other banks before reaching their destination. If this is the case, each intermediary bank is entitled to take a fee from the money that you've sent, leaving your recipient out of pocket.
Worse, there's no way of knowing whether fees will apply before you send. Imagine sending £100 to somebody in a birthday card, and finding out that the post office opened the card and took out a share of the money before delivering it.
4. The incoming transfer fee
Your money has finally arrived at its destination. Think the charges are over and done with? Think again. Your recipient's bank will usually charge a fee to receive the money, further reducing the final amount that appears in your recipient's account.
What's the alternative?
Thankfully, tech has empowered both consumers and businesses when it comes to transferring money abroad. To avoid being ripped off, follow these simple steps.
Before you send, check the exchange rate with a simple search query, such as “pound to dollar exchange rate”. Providers usually charge a small mark-up on this to cover costs, but anything more than 5% should ring alarm bells.
Then simply find an online provider who can transfer your money abroad. Online money transfer providers don't have to pay rent on high street premises, and they use the latest tech innovations and automation to bring down costs.
These savings can then be passed on to customers through better rates and lower fees.
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