The Standard

Australians still paying too much for international money transfers

A growing number of viable bank alternatives offer an easier and cheaper way to transfer money overseas. Picture: Shutterstock

This is branded content for Finofin.

By Alon Rajic, Finofin

Australian banks' fees, composed of direct transfer fees and exchange rate mark-ups, for transferring money from Australia, are incredibly high.

Based on data collated on April this year, a customer who wishes to transfer $10,000 abroad to the UK would have to part with between £250 and £350 - more than $500. If you're sending $100,000 you could potentially pay as much as $5,000 in excessive international money transfer fees.

How do Australian banks get away with incurring such high fees on international money transfers?

It's simple. Australian banks charge moderately when it comes to direct wire fees. On average, you would pay under $15 for an outbound transfer from your bank to a bank account abroad.

It's the currency exchange that makes things far trickier and expensive. Banks have their own buy and sell rates for each currency and those rates represent what they pocket.

Here's an example. On May 30 the AUD to GBP the Reserve Bank of Australia (RBA) rate was 0.5689 but Westpac was only offering 0.5474 Pound Sterling for each Aussie dollar you are transferring through them to the UK. So if you're sending $10,000 that by itself is almost a $370 mark-up on the exchange rates.

Australian banks are by no means any worse than other big banks across the globe. American customers are paying up to five per cent in exchange rate markups and even in the UK, the self-proclaimed international business hub of the world, mark-ups start at 1.5 per cent and go all the way up to three or four per cent.

How to transfer money internationally less expensively

Australians have some very viable bank alternatives when it comes to payments of all sizes. Collectively known as "international money transfer services", these providers can reduce the cost of transferring money abroad, as well as provide several value-adds regarding the payment itself, compared to banks.

With a service like Wise, for example, an Australian customer would pay below $50 in total fees for a transfer of $10,000 abroad. That is an incredibly cheap price to pay for an international money transfer, compared to banks charging about ten times that.

Wise is a very simple website and mobile app that allows you to set up a "virtual" account, transfer money domestically to fund the transfer - in Australian dollars - and then send it to the recipient in the target currency. It also enables you to collect payments in the same fashion. It's very easy to set up and use, but a little more geared towards small transfers and tech-savvy individuals.

For larger transfers, businesses, and customers who require more assistance, there are specialist brokers like TorFX Australia, SendPayments and XE, which offer the same service as Wise, but with an extra layer of support.

Customers who sign up with them are eligible to speak directly to a currency dealer, get access to hedging tools, and most importantly get somewhat of a VIP treatment while saving a bundle against banks.

The actual exchange rates that will be applied to each deal will depend on the volume of the transaction, and customers are advised to try and negotiate the final currency exchange price that will be applied to their deal, in order to maximise savings.

Whichever way you decide to go with international money transfers to a bank account abroad, you are likely to save money against the sub-par exchange rates offered by Australia's biggest banks.

Alon Rajic is the managing director of Finofin, a content specialist business with more than a decade of experience in producing successful comparison websites on a global scale including money transfer specialist site Money Transfer Comparison.

This is branded content for Finofin.