Meet the Money Transfer Companies Disrupting the US Funds Transfer Industry

Meet the Money Transfer Companies Disrupting the US Funds Transfer Industry

The USA might be the greatest economy in the world today. However, making international money transfers from this country is a challenge. There are many options you can use, so the very process of making a transfer isn’t a problem.

The issue is that these transactions are rather expensive because the number of providers that offer them is limited. But this reality is slowly changing due to the emergence of money transfer companies. These service providers still struggle getting a certification to work in the US. However, the ones that are operating within the country are making a big difference.

Who Needs Global Money Transfers in the US and Why Are They So Expensive?

The process of globalization opens multiple opportunities for everyone. Therefore, the number of people who can benefit from affordable international money transfers is growing fast.

One of the options is global real estate investors. Today you can join their ranks with ease as long as you have the capital. And money transfer companies will allow you to use that capital more efficiently as you won’t lose up to 10% of it due to transaction fees and foreign currency exchange (FX) rates.

Businesses that want to go global to reach new markets are another group that needs affordable transfers. It doesn’t matter if you sell online and need to accept customer payments or if you simply need to pay overseas suppliers. Small businesses that go global struggle to make a profit at the beginning. Affordable and secure transfers might speed up the necessary growth process.

People who travel or work abroad as well as expats all need to make regular international money transfers. Therefore, the majority of them now struggle because of America’s outdated and overpriced banking system.

The problem in the States is that the legal system regulates financial services with extreme care. This might be making people safer, but it also prevents competition. As the situation stands now, the main providers of international money transfers are banks and traditional companies, like Moneygram or Western Union.

With no real competition, those providers can take shameless advantage of US customers using these services. Their fees and FX margins are very high, which means that every international transaction costs, on average, 3-10% of the transfer volume.

This cost is so high it prevents many small businesses from going global because it eats up their projected revenue. Private customers and investors who need to send money abroad also struggle.

What Are Money Transfer Companies?

Today there is a solution to the high cost of global money transfers. It’s money transfer companies, also called online currency transfer companies or even FX brokers. These businesses were created as a response to the demand for cheap global transfers.

They operate using a rather straightforward system and low overhead costs. This allows them to reduce the cost of every transaction to 1-3%. Moreover, some of the leading companies today can cut it under 0.5%.

The global industry of cheap money transfer solutions is growing very fast. There are 60+ services competing for the best company awards worldwide and the number of smaller providers goes into hundreds.

However, Americans only get to use the services of a few industry leaders. The majority of global businesses aren’t certified in the US at all, and some are only working in several states.

The few options that are available all over the USA are TransferWise, OFX, and Moneycorp. All of these are industry leaders renowned for offering some of the cheapest and most reliable transfers.

In addition to that, money transfer companies also offer useful extra services. These include currency advice and hedging tools. Benefits of using these services equal to the benefits of having your own financial advisor.

In fact, your advisor is sure to encourage using both money transfer companies and FX hedging tools. Those will not only help you reduce the cost of money transfers and therefore help you save money.

But they will also reduce currency risks you are exposed to when making international transfers. For an investor, this kind of help is truly invaluable.

How Do Money Transfer Companies Work?

The services of money transfer companies are much cheaper because when using them you aren’t actually making a cross-border transaction. The money you send to a different country doesn’t leave your own. Instead, you send it to the company’s account in your country. Therefore, you are making one simple and cheap local transfer.

Then, the company does the same for the recipient in their own country. The company uses its bank account there to make a transaction. This means that the second part of a transfer is also a cheap local transaction.

Add to this the low overhead costs of running a mostly online-based business. All these things show that money transfer companies aren’t using some miraculous power or a con to make their services cheap.

The strategy behind the process is rather simple and straightforward. Banks are doing similar things as well, but for them the legalities of the process are a lot more complicated. Therefore, it’s literally impossible for banks to cut their costs low enough to offer transfer costs similar to FX companies.

It’s also important to note that online money transfer companies make profit off the volume of transactions they process. This means they are desperately trying to attract more clients. Their main target customer groups are small businesses and private investors. Both of them need to make large transfers regularly. Customer retention is another priority for these businesses.

Considering the fact that attracting clients is essential for these companies, it’s no surprise they try to outdo each other. They all strive to offer the lowest possible fees and FX margins. They also offer a variety of extra services to keep their clients interested even if a cheaper offer comes along.

Can You Trust Money Transfer Companies?

Leading money transfer companies use bank-grade encryption and many other cyber protections. Therefore, you don’t need to worry about your personal data any more than you do with your bank. Of course, anything can be hacked with enough dedication. But there is also the same risk for a bank and even the risk of a physical robbery on top of it.

However, you should never forget that there are scammers in every industry. Therefore, to ensure your money is safe, you should only use the services of certified and reputed money transfer companies. Be sure to check if they are audited and licensed by trustworthy authorities, like the FCA.

Money Transfer Companies and the Future of the Industry

The future is looking great for money transfer companies. Fintech solutions, in general, have been doing very well in gaining popularity. But the COVID-19 crisis sped up this process and increased the interest in them.

Even the US, a country notorious for its strict control of all financial service providers is lightening its restrictions. As more businesses are able to come to the US, Americans will have more opportunities to go global with their business or investment ambitions.

An increase in competition will also be good because it will prompt money transfer companies to offer even better and cheaper services. With these services spreading more people will be able to go global with their businesses and investment plans. And by growing their fortunes they will help the country’s economy grow as well.