Is TransferWise the cheapest? How does it compare to transferring money internationally with your bank?
A recent controversy around the unicorn start-up TransferWise
Are you familiar with the cult movie “Enter the dragon”? It’s the best way to describe the buzz and publicity TransferWise was getting after their launch in 2011. It was a revolution! If you live in the UK, there are big chances you might have seen one of their adverts or even witnessed a promotional performance on the streets of London. Just yesterday, they announced that they have raised a further round of funding of $26 million, bringing them into “unicorn” territory – i.e. a company worth over $1 billion.
Creative, witty, groundbreaking. TransferWise has been on a mission of exposing the truth about shockingly high fees of international money transfers via banks.
Well, it’s hard to deny that sending money overseas with a bank can get the best of your time and money. That’s probably why TransferWise became so successful, as they promised to send money overseas 10 times cheaper (or for 90% less) than their high street competitors. Let’s do the math: instead of £44.50 bank fees while sending £1000 from the UK to Poland, with TransferWise you pay less than £5. It goes without saying; these numbers make you stop and think.
Talk is cheaper than a transfer
So while TransferWise communicated to its customers about their unbeatable low fees compared to banks, the Advertising Standard Authority (ASA), decided to verify how much of that promise was actually true. ASA recently ruled that the advertised saving used in TransferWise communications was misleading. It’s hard to believe that one of the leaders in the market would have tried to trick their customers. On the other hand, the opinion of ASA is based on specific evidence. The question remains, where lies the truth? Is it lack of honesty or rather lack of accuracy?
Monito is all about international money transfers. Because we are experts in the field, we have decided to take the matter into our own hands and investigate the case. We wanted to be sure of the actual origin of the numbers that TransferWise have been using so freely. Is the company really 10x times cheaper than the banks? Can you really save 90% on international money transfers with them?
For starters, let’s introduce once more the very nature of Monito. We are a comprehensive comparison platform for international money transfers, featuring more than 450 companies offering services across 201 countries. Inspired by the work of the World Bank on their site Remittance Prices Worldwide, we have created a simpler and more user-friendly website that is updated up to every hour with data regarding international money transfers via banks and the biggest companies in the market. We have established a partnership with a network of money transfer companies, including TransferWise, so the information we receive is updated frequently. It’s our job to make it public and transparent.
On Tuesday the 17th of May, we decided to replicate TransferWise’s approach and see with our own eyes how cheap the services offered by the company really are.
We decided to compare the cost of sending money abroad between two bank accounts with TransferWise with the cost of doing the same with the big four retails banks in the UK: Barclays, HSBC, Lloyds and RBS. During the experiment, we used the data from our site and carried out an independent market study for transfers of £1,000, £5,000 and £10,000 across the six most popular currency routes from the UK. We chose these amounts since transfers up to £10,000 make up approximately 99% of all transfers made with TransferWise. We performed our analysis from the UK to the following destinations: the Eurozone (the countries which have the Euro as their official currency, i.e. France, Germany, Italy, etc.), Poland, Australia, USA, India, and Pakistan.
It should be noted that were only able to obtain the upfront cost of sending money internationally with the banks, i.e. the fees they charge their customers and the exchange rate margin. These costs may be underestimated, as the banks are typically unable to guarantee that any intermediary bank or the receiving bank won’t deduct additional fees for playing their part in the transaction. Since TransferWise uses a local-in local-out model and supervises the entire transaction, they include all the costs in the fee they charge the customer.
We carefully analyzed the data, comparing the four banks with the cheapest service offered by TransferWise. How did the comparison go for the different routes?
What we found out?
Here are our results for the corridors we analyzed.
VS BANKS – COST OF SENDING MONEY FROM THE UK TO THE EUROZONE
|Company exchange rate||1.276||1.276||1.276|
|Mid-market exchange rate||1.2761||1.2761||1.2761|
|Company exchange rate||1.22||1.22||1.22|
|Mid-market exchange rate||1.2699||1.2699||1.2699|
|How many times more expensive than TransferWise||8.53x||7.92x||7.85x||8.1x|
|Savings with TransferWise||88.27%||87.38%||87.26%||87.64%|
|Company exchange rate||1.2429||1.2429||1.2429|
|Mid-market exchange rate||1.2699||1.2699||1.2699|
|How many times more expensive than TransferWise||6.13x||4.59x||4.39x||5.04x|
|Savings with TransferWise||83.69%||78.20%||77.24%||79.71%|
|Company exchange rate||1.2309||1.2309||1.2309|
|Mid-market exchange rate||1.2699||1.2699||1.2699|
|How many times more expensive than TransferWise||7.89x||6.44x||6.26x||6.86x|
|Savings with TransferWise||87.32%||84.47%||84.02%||85.27%|
|Company exchange rate||1.2327||1.2327||1.2327|
|Mid-market exchange rate||1.27||1.27||1.27|
|How many times more expensive than TransferWise||9.26x||6.5x||6.16x||7.31x|
|Savings with TransferWise||89.20%||84.62%||83.76%||85.86%|
|AVERAGE BIG FOUR BANKS IN THE UK|
|How many times more expensive than TransferWise on average||6.83x|
|Average savings with TransferWise||84.62%|
When sending money from the UK to the Eurozone, TransferWise was on average nearly 7 times cheaper (84% cheaper) than the most expensive bank in this corridor (HSBC). Even compared to the cheapest bank (RBS), they were on average 79% cheaper.
It looks even better when the receiver is in the USA, where TransferWise is 92% cheaper than the most competitive bank (RBS) and even 94% cheaper than the most expensive (HSBC).
Poles are the second-largest foreign born community in the UK at the moment. That is the reason why this corridor is one of the most popular ones. TransferWise has been also claiming to help people save 90% on international money transfers from the UK to Poland. However, when sending £1000 to Poland, TransferWise was only 80% cheaper than the most competitive bank, and the savings dropped to 69% when sending £10,000.
To send money to India, TransferWise was only 2.2x cheaper than HSBC, although 5.2x cheaper than the banks on average. While these are substantial savings, they are pretty far away from 90%. It’s worth noting that certain non-UK banks such as ICICI can be even cheaper than TransferWise on this corridor.
When the receiver was in Australia, then TransferWise was on average 5x cheaper than the banks.
The last corridor we investigated was from the UK to Pakistan, where TransferWise was 86% cheaper than HSBC, the only one of the big four banks which can transfer to Pakistan from the UK.
What does it all mean?
Overall, putting together all the data we collected in our independent research, TransferWise was on average 83% cheaper than the big four UK banks. They also always ranked in the top 5 cheapest money transfer services to send money to the destinations considered.
TransferWise is certainly very competitive, and can sometimes save their customers 90% or more compared to the big four UK banks. However, this is the exception rather than the rule: out of the 72 comparisons we made (3 amounts * 4 banks * 6 destinations), the savings reached or exceeded 90% in only 11 cases.
Is TransferWise’s claim wrong? No, as our research shows; customers can indeed save up to 90% by using TransferWise instead of the banks in certain specific cases. Does this make the claim deceptive? Well, according to ASA, at least one in ten customers would need to save 90% with TransferWise for the claim to not be misleading. Given the number of possible corridors and amounts in addition to the constant fluctuation of exchange rates, there is no guarantee that this is always the case, and the ASA were not convinced by the evidence provided by TransferWise.
What is there to be learned then? We all love the amazing job that TransferWise is doing. By offering cheap international money transfers that banks can’t beat, they are fostering healthy competition in the industry. TransferWise is also helping by raising awareness about the excessive cost of sending money abroad through “traditional’ channels.
But the recent ruling really highlights the need for more transparency from all the actors of the industry. Banks should be more transparent about the fees and exchange rate margins they charge to customers, and money transfer operators should fully disclose their calculations when promising savings to their customers.
That’s why we created Monito, to ensure transparency in money transfers. To enable people who send money abroad to get an objective perspective on money transfer companies, we have also started writing independent in-depth reviews. For example, you can read our review of TransferWise on their profile page.
We believe that Monito is a long-term mission, but also a useful tool. Now, anyone is able to choose the best offer on the market and take advantage of the valuable data we collect. So next time you want to send money home, don’t let anyone else decide for you, no matter how charming the ads are. You can find the best solution just by visiting our money transfer comparison website, totally for free, and you can be sure of how much money you are about to save.
Addendum: Since we did our analysis on the 17th of May 2016, TransferWise have removed the claim “With TransferWise you save up to 90%” from the UK version of their homepage. On all other versions of their website, the mention remains. Are you wondering if they are really 90% cheaper for money transfers from outside the UK? Check out our comparison site to get the answer.
Read this post if you’re interested in alternatives to Venmo to send money internationally and head in this direction to compare TransferWise vs HSBC directly beyond pricing.