The Best Way to Transfer Money to a Foreign Bank Account

Last Updated: 12 Aug 2020

The best way to transfer money abroad is to choose the optimum method for your circumstances, access the most favorable exchange rates, and avoid hidden fees. Those choices must be balanced against convenience, speed, and security compliance.

Banks and wire transfer/money operators have been the traditional methods of sending money overseas with customers due to convenience. That convenience comes with additional cost, however. Another less pricey alternative, which is challenging the traditional methods, is through specialized foreign exchange third-party providers.

So, when transferring money to a foreign bank account, consider the following alternatives:

1. Safe, Reliable, and Compliant: Money Transfers via a Bank.

Banks are the logical choice for most people when sending money overseas. Although an easy and secure option, a bank transfer is not always the most cost-effective or convenient method for companies doing business overseas for the following reasons:

Banks offer a wide range of financial services and cannot always allocate full support or online tools for foreign exchange transactions. Banks concentrate their expertise and resources towards their most profitable business—loans, investments, and deposits.
Some overseas banks do not have liquidity in foreign currencies. They must, therefore, rely on larger banks to service their FX transactions. The cost of that additional outsourcing is, of course, passed on to the customer as yet another fee.
Banks usually have less competitive foreign currency exchange rates. They employ what is known as the mid-market rate in trading with other banks. The mid-market rate is not a rate they disclose or offer to customers.
Instead of the mid-market rate, customers get a more static exchange rate. The static rate does not account for fluctuations in the FX values. Banks apply an inflation factor or “spread” and make money when the spread tilts more in their favor. When that tilt is in the customer's favor, banks charge hidden fees to make up the difference.

2. Fast, but Expensive: Money Wire Transfers.

MoneyGram and Western Union are famous for their ability to send money anywhere. They bypass banks and can reach recipients who need cash quickly, often in remote areas. Senders can transfer money online, by telephone, or at a store and get the money to its destination quickly.

The speed and convenience come at a cost of up to 5 percent or more of the transfer amount, often with minimum transaction fees. You might be able to get an online deal or view an FX conversion calculator on the wire service’s website, but don’t count on advantageous (or mid-market) FX exchange rates.

3. Your Best Bet: Full-service, Third-party Overseas Payment Platforms.

An online foreign exchange and global payments platform can provide a full-service, low-cost method for transferring and receiving funds overseas. This service combines the financial expertise of a bank with the speed and convenience of a wire transfer service.

Additionally, a third-party overseas payment platform offers these advantages:

Easy Overseas Payment Execution.

An experienced third-party payment provider has already completed overseas negotiations and banking arrangements for its customers. The customer sets up an online account, deposits funds, and accesses a single source for multi-currency dealings. Fees are typically lower, and FX exchange rates are transparent and competitive.

FX Risk Management.

Managing exposure to FX currency fluctuations is an additional level of due diligence any business owner needs to practice. Your cash flow is the lifeblood of your business. You need to protect your business from unfavorable shifts in FX exchange. Third-party platforms do that through FX risk management, or hedging, tools. The most popular are forward contracts and market orders:

Forward contracts lock in a favorable exchange rate, protecting your business from unfavorable currency fluctuations. By locking in the exchange rate effective at the moment, your cost of payables or receivables remains unchanged, irrespective of market volatility.
Market orders trigger currency trades when the exchange rates move up or down, depending on the price you set. When the exchange rate reaches the amount specified in a market order, you are notified, and your order is filled.

Advice, Expertise, and heads-up on FX trading volatility.

A residual benefit of joining an online payment platform is that it plugs its clients into a network of money management experts. Third-party service providers employ currency specialists, who follow the volatile FX market and keep clients updated with the latest news, insights, and strategies.

Summary and Conclusion.

Choosing the best way to transfer money abroad is a matter of considering the pros and cons of your alternatives:

Banks are secure but do not offer the most favorable FX rates. Also, banks don’t always dedicate the resources for the best customer service in FX.
Wire transfer services are quick, convenient, and can reach the recipient almost anywhere in the world. However, they are expensive and don’t provide the best exchange rates.
Your best choice as a small business operator with overseas customers, clients, or partners is the third-party overseas payment platform. The third-party platform provides a single resource for multi-currency transactions, lower fees, and more favorable FX exchange rates, along with risk management tools and expert advice to protect your business cash flow.

Open your account and stop paying exorbitant bank fees. We have the tools, expertise, and platform to help improve your cash flow and extend your overseas business footprint.

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