Global Money Transfers: Next Gen
The same old and expensive methods are used to transfer money internationally. This may contain many fees, which reduces the amount of money that the recipient gets. However, new Fintech companies have launched a cheaper alternative and incorporated modern technology, which will change the way people transfer money for decades to come.
Did you know that banks use a half-century-old system to transfer your money internationally? This means that outdated methods cater for the banks' preferences keeping the consumers' needs behind their own. Online financial services, such as Paypal and Venmo, are a better alternative but are still quite costly. When sending money to loved ones, the recipient should receive all you have sent. Companies should not be eating it up. This is why financial technology companies, such as Wise and Ripple, developed new, efficient ways to send money overseas without colossal expenses.
First, let's take a deeper dive into the method banks utilize to make foreign transfers. Banks use a system called SWIFT - Society for Worldwide Interbank Financial Telecommunication. Initially founded in Brussels, SWIFT connects banks to carry out international payments. Up to 3 banks are used to move the money per transfer, and for the connecting banks to make money, they must make each charge a fee, which is added to the original payment that the initial bank charges upfront. If that isn't enough, banks also charge a currency exchange rate markup; a hidden cost where the bank that receives the money alters its exchange rate to benefit themselves. In the past, SWIFT was considered an excellent system for people who constantly send money across borders. But the keyword is past - SWIFT was created in 1973, almost 50 years before today! As a result, this old system costs individuals like you a great deal of hard-earned money that can be utilized in far more productive ways.
There is no question that technology in the financial sector has advanced, especially with companies like Paypal and Venmo. The emergence of these companies is a step in the right direction, as they serve very well for domestic transactions. However, these companies are not as economical as new companies in international transactions, such as Wise and Ripple.
Formally called Transferwise, Wise is a financial technology company founded in 2010 in the UK. Taavet Hinrikus and Kristo Käärmann founded it, and their story is one that many can relate to. They were transferring money from the UK to Estonia and noticed that the intermediary significantly reduced the funds received as the transfer was hit with various fees. So, the two decided to take action and made it their mission to give a helping hand to anyone who was in their position. So, you may be thinking, "How is Wise different?". Say you are looking to transfer US dollars to UK pounds. You would make the payment on the US account, which will directly connect to the UK account without hidden fees and any currency exchange markups. This process is much more rapid than most other methods and up to 8x cheaper than banks! Wise's mission is to revolutionize the way people send money internationally and save consumers like you a substantial amount of time and money so that you can focus on the more essential things in life.
Another alternative to SWIFT and older online banking companies is Ripple. Ripple is a cryptocurrency that functions as a digital payment network for financial transactions; however, Ripple is not mined, unlike other cryptocurrencies. Its payment network, RippleNet, takes place on blockchain technologies and sends the Ripple coin, XRP, from the sender to the recipient. If the recipient prefers a cash payment, they can liquidate the XRP. Ripple does not enforce hidden expenses, and the minimum transaction fee (less than 1%) will be voiced upfront. Even more, Ripple processes payments in under 3 seconds! It truly is an express payment system for the masses.
What Does This Mean For The Future:
International money payments/transfers don't have to be unnecessarily expensive, like the SWIFT banking system and some older forms of online finance like Paypal. Instead, companies like Wise and Ripple have presented new, modern technology, which will transform how people send money overseas.
Picture Credits: CitizenPath