Tick-tock. It’s October and the EU-imposed deadline for Brexit looms (again.) Boris has burned the boats, saying Brexit means Brexit. EU Leader Donald Tusk isn’t blinking.
Are you nervous yet? Ready to act? If so, let’s talk about international money transfers from the UK.
If the EU opts to make an example of the United Kingdom’s recklessness, it could prove to be disastrous for holders of GBP. You’re not paranoid – all year, smart money has been moving capital offshore to hedge against the worst-case scenario.
However, if you move your cash improperly, you could lose just as much to bank fees and obscene margins. Thankfully, there are plenty of providers that offer you a much better deal. In this blog, we’ll show you how to save money by moving your hard-earned savings offshore.
Money transfers have become an ultra-competitive business
Here’s the good news: In the UK, the money transfer business is a robustly competitive one. Unlike Canada or the United States, the UK is in a region with scores of sovereign nations. As such, moving cash across international borders is an everyday thing – it has been for decades.
As trade between these countries has increased, demand for better money transfer solutions has risen in lockstep. In 1996, Currencies Direct was founded, becoming the first significant alternative to the banks. WorldFirst emerged in 2004, becoming yet another London area firm offering cheaper transfers than the establishment.
However, as consumers became more comfortable with e-commerce in the 2010s, growth in online money transfer exploded. Transferwise demonstrated the current generation’s willingness to embrace internet money transfer. They facilitated their first wire in 2010 – in 2018, they were moving 4 billion GBP per month.
Smaller online money transfer firms have also managed to claim market share from the banks. Azimo, OFX, and others are all options for those moving money from the United Kingdom. Because of this shift, you can get a far better deal today than you could a decade ago.
How and why has money transfer become such a big industry?
It wasn’t always this way. As recently as the 1990s, banks, and firms like Western Union had a hammerlock on money transfer. Corporations could shake off the egregious margins of the banks, but small businesses were getting raked over the coals.
When hundreds of pounds make the difference between survival and insolvency, high money transfer fees can become a problem. It was against this backdrop that finance industry entrepreneurs saw an opportunity. In 1996, Peter Ellis and Mayank Patel founded Currencies Direct in London. At long last, businesses in the UK have an alternative to the status quo.
They grew quickly, opening a branch office in Spain just three years later. Fast forward to the present day, and they have seven offices around the globe. Despite being surrounded by competitors and being passed by Transferwise, they offer tremendous value. In 2015, Mayank Patel sold the company to two private equity firms for 200 million GBP.
Why have both businesses and consumers taken to these companies so readily? It’s quite simple, really – the internet has thoroughly exposed the decadence of the banks at our collective expense.
Let’s run through a quick example. Let’s say you want to buy a condo in Alicante, Spain. All told, you need to send 25,000 EUR to cover the down payment and closing costs. You bank with Barclays, and they’re delighted to facilitate the transaction for you.
Before you send a single penny, they can charge you as much as 40 GBP. Then, they give you their GBP/EUR – 1.0683. For years, unaware consumers have chalked up wire fees as part of the cost of doing business. And, they’ve mistakenly thought of the bank rate as fair.
Both are gross mischaracterisations. Let’s take a look at XE.com. Since the dawn of the internet, this website has been the internet’s most trusted source for the interbank rate. What’s the interbank rate? Effectively, it is the wholesale rate banks use to trade with each other.
According to XE.com, the GBP/EUR was 1.11509 at press time. That’s a difference of more than 4% from the GBP/EUR rate that Barclay’s charges. Most online money transfer firms charge low/no fees and have exchange rates near interbank. What does this mean? It means many banks still prey on the ignorance of their customers.
Thankfully, more people are pulling the wool from their eyes with every passing year. Below, we’ll discuss several firms that offer a cheap way to move money from the United Kingdom.
What money transfer options are available in the UK?
Currencies Direct continues to provide international money transfer services to Britons. Unlike America, though, they have a lot more company in 2019, as the European market is far more competitive.
Transferwise is the elephant in the room – it was founded in 2010 in London by two Estonian friends. Today, it is the biggest non-bank money transfer company after industry behemoth Western Union. They don’t make money on margin – they charge the interbank rate. Instead, they levy a nominal fee (usually around 0.5%) on the amount transferred.
For most senders, Transferwise is the best option. However, on more substantial amounts, 0.5% can add up. If you’re a business owner that transfers more than 500,000 GBP at a time, WorldFirst may be best. WorldFirst is another major UK-born money transfer firm. China’s Ant Financial may now own it, but they continue to serve SMEs in Britain well.
On amounts above 500,000 GBP, they charge a fee of 0.25%. Above 5 million GBP, it eases to 0.15%. Over a calendar year, using a service like WorldFirst can save a company countless thousands of pounds.
As you can see, you have many options at your fingertips. To find a money transfer firm that best meets your needs, check out a site like MoneyTransferComparison.com. They allow you to compare offers in the UK, which will increase your odds of getting a great deal.
Better to be safe than sorry
It’s not too late to hedge your bets before 31 October. The markets think Boris will bluff the EU, forcing them to kick the can down the road once more. But what if he fails?
World leaders are beginning to tire of populist antics. If they decide to make an example of the UK, it could be bad for holders of GBP. Don’t gamble with your savings – use a reputable online money transfer firm to move some cash offshore soon