Transferwise
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Your company’s getting ripped off on forex fees – Transferwise says it can help

Research from trendy international money transfer service Transferwise has found as many as one in five SMEs that send money abroad regularly have no idea how much they’re charged by their bank.

Typical bank costs are made up of an upfront fee, plus a “hidden exchange rate mark-up”, that peer-to-peer platform Transferwise says is “so untransparent, many SMEs don’t even know they’ve been charged more than they thought”.

Indeed, earlier this month, Lloyds was just the latest in a line of big banks found to be charging hidden forex fees to “less sophisticated” small business customers.

What Transferwise does, which it says makes its service up to seven times cheaper, is facilitate a local payment between bank accounts it’s opened in different markets, rather than sending money from country to country.

So if you’re wiring cash from the UK to Spain, the money never ‘leaves the country’, it’s a local payment to Transferwise here, then another from an account overseas to the relevant person.

Transferwise wanted to prove its model for SMEs so it undertook a ‘mystery shopper’ price comparison exercise with PCM Research between its service and six big UK banks on a transfer of €2,000. And the results are pretty stark. 

Name of bank/broker
Reuters exchange rate at time of assessment
Rate quoted by transfer company
Upfront fee for using transfer company
Money to arrive in euros
Exchange rate mark-up in euros
Exchange rate mark-up in £
Upfront fees plus exchange rate mark-up
TransferWise
1.4483
1.4483
£9.95
2,882.19
0.00
£0.00
£9.95
HSBC (Online/phone/branch banking)
1.4473
1.4189
£9.00
2,825.03
56.80
£39.25
£48.25
Natwest (Online/phone banking)
1.4589
1.4251
£12.00
2,833.10
67.60
£46.34
£58.34
Natwest (Branch banking)
1.4589
1.4251
£22.00
2,818.85
67.60
£46.34
£68.34
RBS (Online/phone/branch banking)
1.4483
1.4122
£12.00
2,807.45
72.20
£49.85
£61.85
Lloyds (Online/phone banking)
1.4483
1.4136
£15.00
2,806.00
69.40
£47.92
£62.92
Lloyds (Branch banking)
1.4483
1.4136
£21.00
2,797.51
69.40
£47.92
£68.92
Barclays (Online/phone banking)
1.4569
1.4278
£25.00
2,819.91
58.20
£39.95
£64.95
Barclays (Branch banking)
1.4569
1.4278
£25.00
2,819.91
58.20
£39.95
£64.95
Santander (Online/phone banking)
1.4483
1.396
£25.00
2,757.10
104.60
£72.22
£97.22
Bank average
1.45246
1.41779
£18.44
2,809.43
69.33
£47.75
£66.19

That’s just one of the reasons the fintech startup has for the first time launched a dedicated business service to help those companies that it says can save money by using its platform.

To date, early business adopters had reported employing interns just to manage the many international payments they were making every month as Transferwise didn’t offer batch payments.

It was so much cheaper, the company says, it was worth it. But a pretty terrible job for Little Jonny out of grad school.

Although it can be hard to gain trust in the largely untrusted world of banking, Transferwise points to its 9.5 rating, from almost 30,000 customer reviews, with commerce comparison service Trustpilot.

That might be why it’s even caught on with an unlikely category of individuals – grannies sending cash as they retire to different parts of the world.

The company has just raised another $26m, bringing its total funding to $117m, from big-name investors like Richard Branson, massive VC firm Andreessen Horowitz and PayPal founder Peter Thiel’s Valar Ventures.

The plan now is to expand its coverage as today, you can’t quite send money everywhere, which is a pretty big snag if you’re after a truly global option for international payments. Brazil, Japan, Singapore and Hong Kong and New Zealand are next on its ‘to do’ list.

If the headlines are to be believed, SMEs are getting ripped of by big banks.

Customers and companies have always been conservative when it comes to trying a new service, but with the fintech party in full swing, now could be a good time to shop around.