This guide to choosing the best international money transfer service is written in collaboration with MoneyTransferComparison Australia.
An increasing number of Australians need to use international money transfer services in 2022. What was once an industry aimed at a relatively niche audience, the money transfer industry has ballooned with globalisation. Even the pandemic could not derail most money transfer companies, although they did incur temporary losses.
The reality is that life, for many people around the world, is not confined to one country. In Australia, there is a community of over 7 million expats and immigrants. The Australian diaspora around the world numbers over 300,000. In a population of just over 25 million citizens, these numbers are very significant.
Some immigrants living in Australia may never need to send or receive funds internationally. Their financial lives are entirely based in Australia. But those who still have families outside the country, along with those who are only in Australia temporarily, send or receive big sums of money on a regular basis.
There is also a growing amount of Australian citizens living in Australia who do business around the world. This includes those working in big companies, as well as members of the gig economy who freelance for companies abroad using wholly digital means. It also includes people selling goods online. This used to be an industry reserved for big businesses, but now any seller can accommodate global deliveries.
These numbers already make an international money transfer industry with a massive scale. But there is a smaller number of people who deal in major money transfers. These are Australians buying property abroad or ex-pats buying property in Australia. These are people diversifying their investment portfolios by going global. They have a lot to lose from poor money transfer processes and are a major boon to money transfer companies in Australia.
Before we get into how to choose the best international money transfer companies in Australia, we need to understand why they are so important.
Foreign Exchange and Australian Banks
There are few Australian banks left that still buy and sell foreign currencies. This is largely because they have traditionally been extremely bad at it. Their practices had them charging fees for international money transfers using the SWIFT network, only to then provide terrible exchange rates. This was just a way of adding hidden fees.
Looking at a couple of the banks that still provide foreign exchange, we can see how much you can lose on a transfer.
According to the current mid-market exchange rate (as of 12 January 2022) AU$ 1 should get you US$ 0.72. Therefore, if you were sending AU$1,000 to the US, the recipient should expect US$720. If you sent US$720 to Australia, the recipient should expect to receive AU$1,000.
However, CommBank and Bendigo Bank both offer rates of US$0.68 if you are sending money and US$0.75 if you are receiving it. Therefore, if you sent AU$1,000 to the US using one of these banks, the recipient would get approximately US$680. Someone would have to send US$750 to Australia for you to receive AU$1,000. This, by the way, is excluding the fees for foreign exchange that they will charge on every SWIFT transfer. Of course, the bigger the transactions become, the more money you lose because of the exchange rate.
You shouldn’t lose US$30 on the exchange rate on this transaction alone for the privilege of using a bank’s underwhelming services. They can and should provide rates almost the same as those you will find on Google at any given time. But because they have been taking advantage of clients using Forex for so long, very few Australians use the big banks for this purpose.
International money transfer companies provide excellent exchange rates. They also charge no fees on most transfers. For this reason alone, you should choose the best money transfer service to send and receive funds. It helps that their service is better as well, with shorter wait times and more functionality.
Here is what you should look for when choosing the best international money transfer service.
Reputation
There is a reason people still use banks for foreign exchange. Quite simply, they trust their banks. They know that they have recourse if the transfer does not go through and that the bank is regulated by all the major financial authorities. They’re willing to pay for reputation because the service being given is so important.
The good news is that there are excellent companies providing as trustworthy a service as the banks. However, when doing an international money transfer comparison, reputation should be the first thing you consider. While there are some up-and-coming companies that will surely provide innovative services that improve your money transfer experience, for now, it is wise to go with the big names in the industry.
Companies like TorFX and OFX are known worldwide as reputable companies that provide excellent services. Among others, they have been operating for years, serving millions of customers. They all have authorisation from Australian financial authorities and are therefore regulated in a way that gives you recourse if any problems arise.
Local Offices
Another factor to take into consideration is whether a money transfer company has offices in Australia. This is not strictly necessary, as some companies today are going totally digital. However, it does give many Australians peace of mind to know that they can go into an office if they have questions or complaints.
OFX is actually an Australian company, listed on the Australian Stock Exchange (ASX), that has gone global. Their headquarters are in Sydney, and will therefore attract people who prefer using local services.
TorFX and WorldFirst are British companies with offices in Australia, while CurrencyFair is an Irish company with Australian offices. Their physical presence in Australia makes them attractive to people who aren’t hung up on using an Australian company but prefer to use a company with a presence here.
Companies like Halo, Wise, and XE Money Transfer don’t have local offices but all have Australian licences. They can certainly be trusted as some of the best global currency exchange companies, but won’t appeal to those who want to be able to visit a branch.
Rates
Before we get into the different rates charged by international money transfer companies, it is important to note that they will always be better than what you will get from a bank. Even those companies that charge fees on international transfers will save you money with far superior exchange rates.
The reality is that most money transfer services don’t charge fees on international transfers. Rather, they take margins on the exchange rates provided. Unlike with banks, however, these margins are small and the companies are transparent about them. You can get quotes on the websites of various money transfer companies and compare them with the rates on Google as well as the rates offered by banks.
Rates and fees also differ depending on what kind of transfers you are doing. Certain companies use their rates so as to target the kind of clients they want. Halo, for example, charges high fees for smaller transfers because they are primarily geared towards big business and investment transactions. OFX and TorFX charge no fees no matter how small the transfer, as they are geared towards transactions from across the board.
Functionalities (Hedging)
When choosing a money transfer company you should look into their additional features. Functionalities like hedging are extremely useful for people doing regular transfers, whether for things like payments on a property or income earned every month. Hedging provides a way of ensuring your exchange rate remains static, even when currency pairings are in flux.
While this may not always seem desirable, as the exchange rate may fluctuate in your favour, it is important for people who need the stability of knowing they will not have to pay more or receive less month after month.
For those who only occasionally transfer money, hedging options are not important. After all, if you don’t know when next you will need the service, nailing down an exchange rate won’t be helpful.
Customer Service
Because you are dealing with money, customer service is very important. You need to know that if something goes wrong – your transfer takes too long to go through or seems to disappear – you can speak to them and they will solve your problem. No matter how good a company’s rates and features may be, without great customer service they are difficult to trust.
When choosing a money transfer company, look at customer reviews. Disgruntled customers can be relied on to share their negative experiences online. If these bad reviews are a tiny minority, you can choose to ignore them. If, however, there is a sizable number of bad reviews about customer service, you should take care, even if they are still in the minority.
Dedicated Dealers
Most people carrying out small transfers do not require much hand-holding. However, if you are dealing with big sums of money or have complex requirements, choose a company that offers dedicated dealers. These are people who will help you make the best decisions each step of the way, whether regarding when to send your money, when to use hedging features, or anything else.
For some people, the presence of a human to talk to is reassuring even when they don’t strictly need help. Although we have made great strides in the twenty-first century, it can still feel uncomfortable to carry out financial transactions entirely online.
Apps
The existence of a high-quality app is not a strict necessity for many people carrying out international money transfers. However, a good app is useful for making or receiving payments on the go and tracking where your money is.
Some companies place a higher priority on a great app experience than others. So, if a company that has a great reputation has bad reviews regarding its app, this should not be a dealbreaker. Apps are useful, but ultimately it is the service itself that is important.
When it comes to the online platform, however, functionality is crucial. This is the primary way most people make transactions, and a bad experience can lead to major issues.
Multi-Currency Accounts
Finally, it is worth giving mention to multi-currency accounts. A multi-currency account is a handy way of dealing with foreign exchange, especially if you are doing regular business outside of Australia. A multi-currency account allows you to hold money in different currencies, rather than converting them immediately. Then, when you need to send money in another currency, you will use what you already have in that currency.
Multi-currency accounts provide great functionality, while avoiding fees or margins on transfers. They are especially useful for people selling goods online, who have built up a global client base.
The above considerations will help you make the best choice on international money transfers. Above all, choose a company with a great reputation for helping Australians transfer money on a day-to-day basis.
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