Written by in P2P on April 7, 2020
Photo by Element5 Digital on Unsplash
Transferring funds from one country to another is an extremely common occurrence. With the frequency of long-term travel, remote working opportunities, and living or studying abroad, there are endless reasons why one may want to send money from one country to another. Though, just because it’s a common practice, it doesn’t mean that all methods are safe, secure, and honest in terms of fee structures and exchange rates.
Protecting oneself before, during, and after an international money transfer, whether sending or receiving, is important for several reasons, many of which involving financial security, hidden fees, and information/identity security. Before learning how to protect yourself when sending money abroad, here is a breakdown of the types of country-to-country transactions you might encounter.
Types Of International Money Transfers
There are six general categories in which international money transfers fall under including small regular payments, small time-sensitive payments, small one-off payments, large regular payments, large time-sensitive payments, and large one-off payments.
To decide the method which is best for your transaction(s), understanding the type of transaction(s) you’ll be conducting is a great place to start. Different types of transfers have different priorities, whether it be efficiency, cost, or general workflow/infrastructure. To further breakdown the different transaction types, here are some examples:
An example of small, regular payments would be a parent sending weekly or monthly allowance to a child studying abroad. An example of a large, regular payment could be a payment for retainer-based contract work for an expensive service. Time-sensitive payments would be if someone was in a serious pinch and needed a flight booked or a rent payment in an instant, these can either be small or large. Finally, small and large one-off payments are one-time payments that aren’t time-sensitive and not reoccurring. Some examples of large one-time payments would be: investing in overseas property, cars, and other investment purchases.
Each of these has different motives and therefore a different set of standards of service. When one is looking to send regular payments, they may be more concerned with the structure and convenience of the system as well as the cost. You’d likely want it to be easy, even automated, rather than an in-person errand if you’re doing it weekly or monthly.
If someone is sending a time-sensitive payment, they’d (clearly) be most concerned with the speed and efficacy. Lastly, if someone is sending a one-off payment, they may be concerned with the fees. In each of these scenarios, the sender and recipient of the funds will likely be concerned with the safety and security of their money and information.
Of course, all of these priorities depend on the financial welfare of the parties, the amount being sent, and the time-pressure attached to the transaction.
Once you understand your priorities in a transaction or a set of ongoing transactions, there are many methods you may choose from.
Different International Money Transfer Methods
There are several ways to send money to another country, each of which has different benefits. Some are digital, some may even seem dated or archaic, but different methods make different individuals feel safe and secure and you need to choose what works best for you.
It may seem old fashioned, but cash transactions are still doable and, in fact, quite practical in some cases. One can simply withdraw money from their bank and deposit into another account at the same or different institution. For this, you must have the banking information of the individual’s account you’d like to deposit into. So, it’s a good method for family members or trusted companions, but not always for everyone else unless you’ve opened an account specifically for that reason. This method is free, quick, and quick secure as the cash is only in your hands.
The downside of this method is the analog nature. Moreover, if one cannot get to the bank to conduct the transaction, it cannot be carried out.
Another analog method is personal checks. Similar to cash deposits, you can simply write a personal check and deposit it into another account. Checks can also be sent by mail, a method which is highly discouraged when it comes to cash. Though, this causes delays by way of the post and in terms of exchange rates. Typically a mailed check will take time to arrive and more time to be processed. If you can deposit the check directly in the recipients' account, this can be an efficient strategy.
As cash and checks are often only available in same-currency, it is typically a more advisable route to transfer in digital form or wire funds. SHIFT Connect, for example, does not work in cash or check.
If the exchange rate is a factor, which it commonly is in international banking, money orders may solve this. You can purchase money orders in whichever currency you want your recipient's money to arrive in. This can be done at many post office branches. Though, money orders do often come with fees associated.
Email Money Transfer
Some online banking services allow for email money transfers, for example, several large Canadian financial institutions offer online service. The transactions are initiated by email and the recipient receives an email notification that funs have been made available to them. A security question is typically required to claim the funds. There are nominal fees associated and it is immediate and quite secure as it is performed on an online banking platform. Though, there are several scams associated with online banking so it is important to never accept funds from a sender you don’t know.
Money Transfer Software
There are several money transfer software, applications, and digital infrastructures specifically made to send money between parties. Though, not all of them can communicate between international banks or financial agencies. It’s important to understand what currencies and countries each digital service operate within. Services such as these typically have fees associated.
Money Transfer Firms/Agencies
Finally, there are in-person versions of these services in which an individual or business can act as your concierge, ensuring your money is transferred safely and assisting you in hedging your finances when operating in different currencies. These firms, agencies, or contracted individuals will take fees. It’s important to do your research, checking with friends and family, the Better Business Bureau in your area and the Government of Canada website even suggests contacting the consumer protection offered in your province, state, or territory.
Questions To Ask
If one or several of these options sound suitable to you, there are some questions you should consider asking before selecting a method, service, software, or agency.
How Much Will It Cost?
It’s important to ask tons of questions when it comes to understanding the fee structure you are dealing with. If you’re working with private business, ask how they earn their profit, whether it be from the exchange rate, grandfathered fees, or per-transaction fees, for example. Regulated institutions such as banks must share their fee structures. Ask around, compare rates and structures (flat frees of sliding scales) and see what works for you and your needs.
Are Their Costs To Receive The Money?
It’s important to take the other end of the transaction into account, too. Rather than only asking what your fee structure will look like, you can do your due diligence on the recipient’s behalf as well.
What Is The Collection Process For The Recipient?
Gaining an understanding of what the process looks like on the sending end is important for your task flow, but it’s also important to understand what your recipient will have to carry out to get their funds. Are they able to make it to the location they need to if there is a physical location? Will their IP address allow for the downloading of the transfer application you’re using? Ask these questions ahead of time.
What Is The Exchange Rate Of This Method?
Some businesses make their profit from adding on top of exchange rates. This is commonplace and normal business practices, but it’s important to know ahead of time, as well.
How Long Will It Take?
A key factor in the selection of your method and your provider is time. If you’re operating on a time constraint, you’ll need to know the exact waiting period attached to your transaction. Also, be sure to ask when the recipient can claim/withdraw the funds as another waiting period may be associate with the other end of the transaction.
How & When Will I Be Notified?
Will you get confirmation when the transfer is complete? How? And at what point in the transaction? These are important checkpoints to be aware of.
Is The Business Or Service Trustworthy?
Ask around, do your research, ask friends, family, and the better business bureau in your area. There is no shortage of resources and reasons to make sure you’re safe, secure, and supported when sending money abroad.
As remote transactions are becoming more prominent, capable, and accessible, the decentralized nature of SHIFT Connect allows you to conduct your transfers without leaving home. While old methods remain, new platforms such as ours give you access to global payments services form the comfort of your home.
To find out how Shift’s custom solutions can serve and elevate your business, get in touch today.