Today’s marketplace is filled with digital nomads and freelancers working from their laptops anywhere in the world. Ask any of them what their biggest issue is, and they’ll all agree it’s receiving payment across borders.
Before the rise of fintech (financial technology) companies, the only way to transfer funds internationally was through a major bank or a cash pick-up service like Western Union.
The challenges with these now archaic options include high fees, poor exchange rates due to excessive in-house markups and slow transfer times, often taking up to seven business days.
People globally cried out for a better way, and some businesses listened.
Fintechs Manage International Payments Efficiently
This prompted a new challenge: how could people transfer money across borders without high fees or delays? Enter the fintechs. While there are around 300 fintechs that can action these requests, the three most trusted and used are PayPal, Wise and Revolut.
PayPal
PayPal is one of the earliest and most prominent global fintechs. It was introduced to the market in 1998 and now has an estimated 436 million active accounts in over 200 countries.
The company provides digital payments, cross-border transfers and merchant services outside traditional banks. It also offers an innovative online checkout platform and peer-to-peer payment systems.
Creating a PayPal account is straightforward; it’s all tied into a user’s email address and a nominated bank account. To receive money from another PayPal user, all they need is the payee’s email address.
PayPal is fast; in most cases, the funds arrive in seconds. It’s getting the money back from PayPal to the payee’s account that can take time, depending on how much they’re willing to spend on fees.
If the user waits two to three business days, there’s no transfer fee. If the money is required instantly, there’s a one per cent surcharge. On small amounts, this fee is negligible and may be worth paying.
In some markets, if there have been several transfers to and from PayPal, and digital recognition of the accounts is created, the funds could be there as early as one business day.
PayPal’s biggest flaw is its exchange rates. Compared to Wise and Revolut (see below), it applies a three to four per cent currency markup and a flat fee. If transactions are high-dollar value, significant amounts are lost due to the rate and fees.
Wise (formerly TransferWise)
TransferWise was established as a fintech to address costly and slow international money transfers. The fintech aims to provide transparent, low-fee currency exchange using real mid-market rates.
Services include multi-currency accounts and global payments primarily via digital channels. TransferWise was introduced to the market in 2011 and was rebranded as Wise in March 2021 to reflect its broader range of services.
One Wise service that’s been popular is the prepaid Mastercard, which can be used to withdraw money from ATMs or pay at the checkout via Apple Pay. Wise operates in 70 countries in 50 currencies and has an estimated 20 million active customers.
Wise is regulated, so creating an account requires a strict security process where the user needs to upload images of photo IDs with selfies. Transfers can range from instant to two business days.
A payer needs the other payee’s Wise ID (if they’re also using Wise), which is most commonly an email address, to make the payment. If they’re not a Wise customer, the payee must provide their dedicated Wise-generated bank account details.
Payees can transfer to any local bank account by providing the account details. Some countries require an explanation (chosen from a drop-down box) for the transaction, such as ‘salary,’ ‘land purchase’ or ‘personal expenses.’
Wise is transparent about its exchange rates and fees, using the available mid-market rate that a user can find on Google. Wise’s exchange rate makes it attractive for large transaction amounts. Before making a transaction, the rate and fees are made clear.
An occasional flaw that Wise faces is that a transaction may be instant one day but delayed the next, despite being a similar transaction—that’s quite an inconsistency. Payees accustomed to instant transfers may be disappointed, but this is the exception rather than the norm.
If Wise warns of a delay with one bank, try another—it may be faster or even instant.
Revolut
Revolut is a digital-first financial platform born out of fintech innovation. People in the UK frustrated with the archaic banking system cried out for something modern and reliable. Revolut, a financial system for the new generation, fits the bill.
Revolut operates without traditional branch infrastructure, relying on mobile and web platforms. Services include multi-currency spending, global money transfers and budgeting tools.
In some markets, Revolut has become a popular payment method among the users of crypto—whether funding accounts on online gaming platforms like casinos or paying at checkout via Apple Pay or Samsung Pay.
Revolut was established in 2015 and has around 60 million accounts, with 10 million of those (its largest market) in the UK, demonstrating the necessity of this product. The platform supports over 30 currencies in 150 countries.
While not regulated in the UK (yet), Revolut has a similar sign-up process to Wise, requiring photo ID uploads with selfies. Where the product shines is in its transfer times. Revolut-to-Revolut transfers are instant and fee-free; for other global payments, it’s generally faster than PayPal and Wise.
Like Wise, Revolut is transparent about its exchange rate and fees. Avoid using the service at weekends where a 1% surcharge applies.
Where Revolut falls flat is that a user can only make a limited number of transfers before the fees increase considerably. To avoid paying higher fees, users can buy monthly plans based on transaction volume.
Look Beyond the Traditional Cross-Border Payment Methods
For those people still using their local bank to transfer funds and make payments across borders, it’s time to change. The world of fintechs, especially the big players like PayPal, Wise and Revolut, can perform these transactions at greater speed and lower cost. Switching to a fintech saves both sender and recipient time and money.
