By Kirill Yurovskiy, Money Transfer Expert
When it comes to moving money across borders, choosing the right transfer method can mean the difference between losing a significant portion to fees and exchange rate markups versus retaining the maximum amount possible. As someone who has spent over a decade in the money transfer industry, I’ve seen firsthand how costly the wrong choice can be. That’s why I’m going to share my top tips for choosing the most profitable way to transfer funds internationally.
Understand the Types of Transfer Services
Before examining the specific pros and cons of each transfer option, it’s important to understand the three main categories of international money transfer services:
1. Banks
2. Traditional Money Transfer Companies (Western Union, MoneyGram, etc.)
3. Digital Money Transfer Specialists (TransferWise, OFX, XE, etc.)
Each type of service has its own advantages and drawbacks in terms of fees, exchange rates, speed, convenience and other factors that impact the overall profitability of your transfer.
Banks – The Costliest But Most Convenient Option
For decades, banks were the default option for sending money across borders. The inherent trust in banks made them the safest perceived choice, despite typically offering the worst overall value and highest costs. Banks generate revenue through:
• Flat Fees: Ranging from $25-$50 per transfer
• Exchange Rate Markups: Adding a 3-5% markup above the mid-market rate
• Account Fees: Monthly fees just to retain access to money transfer services
While convenient if you already bank with them, the compounding costs make banks an incredibly unprofitable way to move money internationally in most cases.
Traditional Money Transfer Companies
With the rise of companies like Western Union and MoneyGram in the pre-digital era, the stranglehold banks had on international money transfers was finally broken. These early money transfer specialists offered three key advantages:
1. Lower Upfront Fees: Typically under $10 for a basic transfer
2. More Locations: Thousands of physical transfer locations worldwide
3. Cash Pickup Option: Ability for recipients to collect cash payments
However, they still suffered from making money through exchange rate markups of 5-7% in most corridors. Plus, the involvement of physical locations and cash made them slower and opened security risks.
Digital Money Transfer Specialists
The internet and rise of fintech have given birth to a new breed of leaner, tech-driven money transfer companies built specifically for sending funds across borders at the best possible value. Companies like TransferWise, OFX, XE, and others take advantage of:
• No Physical Overhead: 100% digital platforms with lower operating costs
• Streamlined Back-End Systems: Allowing for mid-market exchange rates
• Subscription Models: Generating recurring revenue without per-transfer fees
For transfers over a few hundred dollars, these digital specialists are almost universally the most profitable and affordable option available today.
Pick the Right Service Based on Your Needs
Now that we understand the main categories of transfer services, let’s look at how to choose the most profitable option for your particular situation:
For Smaller Transfer Amounts (<$500)
When transferring relatively smaller sums of money internationally, convenience and upfront costs matter more than exchange rate markups. Here, digital money transfer companies like TransferWise come out on top as they charge low (or even zero) upfront fees.
For Larger Transfer Amounts (>$5,000)
Once you get into larger transfer amounts, the exchange rate you receive becomes exponentially more important than any upfront fee you may pay. Digital services that match or closely track the mid-market rate will be the most profitable avenue.
For Recipients Needing Physical Cash Pickup
Some recipients may not have easy banking access, making cash pickup the only viable option for getting the funds. Among the traditional player, Western Union tends to have some of the lowest overall costs if a cash transfer is absolutely necessary.
For Frequent/Recurring Transfers
Those needing to make frequent transfers (e.g. paying workers overseas, funding overseas investments, etc.) should explore plan-based options from digital services like OFX that reduce overall costs through a flat monthly fee rather than per-transfer pricing.
For Oversees Mortgage/Pension Payments
When transferring large, recurring sums like overseas mortgage or pension payments, services like XE that specialize in such transactions and offer forward contracts to lock in rates can maximize profits over time.
For Trust/Convenience Over Cost
There is still a segment, typically older generations or the extremely wealthy, who are willing to pay higher costs for the perceived safety/trust of their primary bank. If losing 3-5% on transfers isn’t concerning, the convenience of an existing bank relationship can be worthwhile.
Leverage Market Volatility
The foreign exchange (forex) market is incredibly dynamic, with currencies constantly fluctuating in value against one another. This provides opportunities for profit maximization if you’re transferring at optimal times by taking advantage of:
• Currency Valuation Cycles: Certain currency pairs experience historical lows/highs annually
• Interest Rate Impacts: Rates increasingly influence currency values
• News/Crisis Events: Geopolitical and economic news can rapidly move markets
By carefully timing transfers during beneficial periods, you can compound profits over time. Conversely, transferring during negative volatility can significantly reduce how much your recipient ultimately receives.
The Bottom Line
When it comes to moving money internationally, there is no one-size-fits-all “best” transfer method. By understanding the key players, their potential pros/cons, and your own specific transfer needs, you can maximize profitability.
For most situations, utilizing modern digital transfer specialists like TransferWise, OFX or XE will yield the greatest output for your recipient. However, services like Western Union cash pickup or traditional banks may be preferable for niche use cases.
At the end of the day, a money transfer is transporting value across borders – you’ll want that value to be worth as much as possible when it reaches its destination. Follow the tips above, remain aware of market conditions, and you’ll ensure profits aren’t unnecessarily lost whenever funds need to move internationally.