Overseas money transfers: the peer-to-peer alternative

Get access to "real" exchange rates when transferring money overseas – and avoid the smoke and mirrors of banks and brokers – with TransferWise

Historically, money transfer between countries has been a costly activity. Even using services with seemingly small fees, you are at the mercy of your bank’s exchange rate – which is usually not comparable to the best rates. Transfer brokers or banks take a cut from the profit made from giving such a bad rate, leaving you out of pocket – sometimes to the tune of 5pc of what you originally intended to send.

Given the modernisation of other consumer industries, it is difficult to know how this archaic practice has continued for so long. Thankfully, those days of smoke and mirrors that snatch money away are numbered. An internet-based, peer-to-peer transfer system calledTransferWise has finally put the consumer at the forefront of the operation.

Leading this revolution in overseas payments, TransferWise – which was set up in part by Skype’s first-ever employee Taavet Hinrikus – makes transferring money cheaper by using peer-to-peer transfer.

Peer-to-peer money transfer works when people in other countries want to transfer money, too. Essentially, you are matched with someone who has the currency you want to transfer into. That person wants to exchange into your original currency through a third party such as TransferWise. The third party takes an upfront fee for doing the transfer and that’s it.

This gives consumers access to the “real” rate (as you would find in newspapers or at xe.com). So other than the fee to provide the service, the consumer doesn’t lose out on money by transferring at an unfair rate.

As with many internet ventures, transparency is key – TransferWise, which is authorised by the Financial Conduct Authority, is clear about the fee charged and the rate at which the money will be transferred. This kind of practice is in stark contrast to the clear-as-mud way other services approach international money transfer.

And understandably, it is popular. So far, £1 billion has been transferred using the system, and TransferWise has saved its users £45 million by helping them avoid hidden fees. So, whether you are an expat, overseas student or doing business between countries, this is probably the news you have been waiting for.

How to use TransferWise 
1. Log on to transferwise.com

2. Sign up, provide photo ID and enter how much you are transferring and who to (this can even be your own overseas account).

3. Upload your money to TransferWise (the company is fully authorised by the FCA, so the money is safe). There is a £1 fee payable for transactions under £200 and 0.5pc for transactions over that amount.

4. TransferWise will match you with someone sending in the other direction and the converted money is sent to the account you specified. You and the recipient also receive a confirmation email.