TransferWise Review: Is It Safe for Moving Money Overseas?

Dateline: Bogota, Colombia

TransferWise – the FinTech company disrupting the international currency exchange market – is becoming increasingly popular.  Not only do they send money all over the world in other currencies for much lower fees than most banks but they also offer services to hold money in different currencies both for personal and business needs. 

As the company has been getting more attention, many people have asked me to provide a TransferWise review to discuss my opinion of this particular FinTech. While I am not a huge fan of most FinTechs, I have to confess that I do have a pretty good opinion of TransferWise. 

Admittedly, my opinion of TransferWise is based on the needs of the folks I work with, including 7- and 8-figure entrepreneurs and high-net-worth individuals. I’m not 19 years old anymore just starting out in business, so my TransferWise review will be unique from others you may have seen.

It’s important to see that there are different needs for different people. What may be a great solution for one person may cause terrible problems for another. The same is true of Transferwise. It has both pros and cons.

As such, in this TransferWise review, I will discuss its rates, its multi-currency accounts and balances, how to know if it is the best option for your particular situation, as well as where the service falls short.

TransferWise Rates are Hard to Beat

Let’s start this Transferwise review with the rates. The FinTech’s main function is sending money. That’s what they are known for, especially international transfers.

If you have any experience moving money overseas, you know that banks regularly rip you off with their fees for transfers and currency exchanges. 

That’s where TransferWise comes in.

TransferWise was started by a couple of people frustrated with constantly needing different currencies but always coming face-to-face with banks’ terrible exchange rates and high exchange fees. They realized they could avoid those high fees by having a peer-to-peer matching system that could match people desiring opposite currencies. 

The way TransferWise works, the money never actually leaves the country of currency. For example, one customer wanting to make an exchange from USD to GPD will deposit their money from their US account into the TransferWise account that is also located in the US. Once that occurs, TransferWise then provides the equivalent amount of GBP from its account in the UK to the customer’s account in the UK.

The money itself never crosses borders, but the exchange occurs anyway.

All for a much lower cost. 

By having accounts in many countries and in over 50 of the major currencies, they are able to cut out high bank exchange fees for their customers.

It’s a great system and their rates are pretty good. It’s especially beneficial for smaller payments which you can generally debit from your bank account. You don’t even have to go through the hassle of wires that you do for larger payments. It’s pretty efficient. 

The Euro rate, for example, is much better than any U.S. bank that I’ve seen. TransferWise can even beat the rate of banks that I have good relationships with. If you’re sending money in those widely used currencies, it’s pretty good.

Now, If you have a private bank or a priority bank, you may be able to beat TransferWise’s rates for some main currencies. I have a bank in Asia that can beat TransferWise whenever I want to transfer U.S. dollars into Euros, Swiss Francs, or Singapore dollars. They cut the spread by about 50%. 

If you have that kind of relationship with your bank, especially for large currencies, that may be better than TransferWise. 

I have often said that the best way to transfer money internationally is to have a bank that you trust handling the transaction on both ends. It’s worth it because it’s faster, it’s easier, and it happens without adding on the layer of dealing with peer-to-peer money transfer services.

For example, if you have half a million to millions of dollars to put in an offshore bank and you have a relationship with a bank there, then it’s possible that they can get you better rates on whatever currencies that they deal with — generally for just the standard currencies.

Where TransferWise does very well is when you are transferring money into more exotic currencies. If you want to put money into the Georgian lari and you need to send money in Croatian Kuna, you might run into some holdups and major fees at a bank. Those are currencies that aren’t widely offered. 

So, if you’re doing deals in different places around the world and you want to hold some of those currencies, or if you have employees to regularly pay in some of those countries, TransferWise may be the way to go for you. It may be easier than setting up a local bank account and sending money from your home account to convert it there. Just keep it simple and pay Transferwise’s greatly reduced fees.

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TransferWise Balances and Multi-Currency Accounts

One of the services that Transferwise also provides is balances. You can actually open a balance in a number of different currencies and store money in those accounts on both a business and personal level. 

For Nomad Capitalist investors, this could be useful if you’re looking to buy a property in a particular place. 

Let’s say you want to buy a property in Malaysia. If you don’t have a residence permit there and you don’t own the property yet, then you really have no basis for opening a bank account there. 

I went through this the first time I purchased a property in Malaysia. When I signed the contract, the rate was almost at a record low. By the time I had started making payments, the ringgit was coming back up. It would have been nice to have had a balance account with TransferWise with the ringgit already exchanged and not have to deal with changing exchange rates.

When I did my most recent transaction in Malaysia, I had bank accounts in Asia so I was able to use TransferWise’s convenient exchange rate. 

I’m not extremely obsessed with exchange rates, but during the pandemic, I would look for times when the rate was pretty bad against the U.S. dollar. If it was, I would convert or move money over to a needed currency and keep it staged and ready to go to pay for transactions from my bank account. 

If you don’t have a local bank account, TransferWise allows you to store money in the local currency and have it ready to use.

Is TransferWise Safe? A Concern About Balances

My concern with balances though is that you’re basically adding a layer of extra risk in between you and TransferWise. 

While you can store money in multi-currency accounts, the money stored in these balances is basically put into the banks that TransferWise uses with whatever deposit insurance they may offer. TransferWise does use some of the strongest banks, but if those banks go under, then there’s not a lot they can do about it. 

Your money is insured by the banks that TransferWise uses, not TransferWise itself.

So, to me, it’s kind of the same equation that I ran into with my real estate lawyer when buying a property in Malaysia: I told her that I didn’t want to be keeping tons of money in the bank so I wanted to get the transaction done and paid for. She offered to keep the money in her escrow account, but I told her that doing so really didn’t solve my problem of having too much money in the bank. It just added another layer of complexity in which the money was out of my control because it would be in her account, not mine. 

I feel the same way about TransferWise. With TransferWise balances, you can pull the money out whenever you want and direct it where it goes — which is different from an escrow account — but if you’re going to be doing deals in countries around the world, you may as well make the effort to open your own account in the country where you’re going to do business. 

Let’s say you’re going to buy a property in Turkey for citizenship by investment. Obviously, it’s a country where you want to be very careful what exchange rate you’re getting into since the currency is somewhat volatile. You could just go to Turkey, or potentially remotely, get a tax ID number, open a bank account, and move the money in just using TransferWise as a transfer mechanism from your base currency into your own account in Turkish lira. 

However, if you have a more sophisticated financial plan that includes more than one or two banks, you can get multi-currency bank accounts around the world. If you are paying recurring expenses and you can get bank accounts in whatever country you’re doing deals in, that might be easier and safer than holding TransferWise balances.

So, as far as this TransferWise review is concerned, I personally don’t like the idea of holding balances with TranserWise’s multi-currency accounts.

The Benefit of Paying Domestically

Before this TransferWise swings too hard toward the negatives, I have to say that what I do like about TransferWise is that businesses can add on US, UK, or Australian accounts that receive domestic funds.

To illustrate, let’s say I want to take money from someone in Australia and they’re more familiar with paying domestically. I can get a TransferWise virtual account and they can pay me in Australian dollars, in Australia. Again, that’s great for domestic payments. 

However, as a 7- or 8-figure entrepreneur, if you have a really sophisticated business structure, you’re probably going to have a business bank account offshore that accepts multi-currencies or at least gives you pretty reasonable spreads, making this particular TransferWise perk less necessary.

Certainly, TransferWise offers a good element of receiving money domestically although, sometimes you could simplify by using a domestic company to receive payments as part of an offshore structure. 

So again, Transferwise may just be adding an unnecessary layer of confusion. 

If anything, the ability to receive money into balances is good and then you can move that into your bank account. 

But if you are banking locally, the ability to hold money in balances is not as exciting. It’s a great option if you’re just in one country and you’re not doing the stuff we’re talking about. It definitely gives you exposure to different currencies. But it’s not my preferred method as it adds extra layers that could be simplified by opening your own account in the country in question.

The Trouble with Emerging Currencies

TransferWise Review Trouble with emerging currencies

While Transferwise is great for exchanges in many currencies, it is not as useful for exchanging more exotic emerging currencies.

Even though TransferWise can be a great solution for exotic currencies like the Georgian lari or Croatian kuna as discussed above, there is more of a challenge when dealing in emerging currencies where the money is going into emerging accounts. TransferWise may have stricter due diligence requirements with banks in those kinds of countries, which will lead to higher fees and more paperwork.

I’ve seen people who talk about sending money to Nigeria or Kenya, where TransferWise doesn’t have the emerging currency. Those transactions are subject to a higher level of scrutiny. Where any kind of new FinTech service, like TransferWise, falls short is that they’re designed for a less sophisticated user. 

On occasion, I have recommended TransferWise to certain clients who may, for example, need to fund a bank account in Europe for residency. TransferWise works great in those situations. But when you are sending repeated payments to unique places that are not within the main TransferWise network, you’ll find that it is not as well set up to handle those situations.

Most FinTechs really just want everyday users with basic needs.

We had a payment that was fine and everything worked out, but TransfeWise was a little freaked out about it. Their customer service is generally very good, but we sent a payment, and both on TransferWise’s end and the receiving bank — they were concerned about what was happening because it was out of the ordinary. Other people I have talked to have had similar experiences.

The other challenge is if you’re sending money to countries that are outside of their network, like Serbia, for example. They don’t have a facility in Serbia. You can’t send Serbian dinars. You can send U.S. dollars or Euros, but they don’t have the ability to balance out their books with unusual currencies outside of their network. 

They have to use the Swift network and they’ll charge you a little bit more for that. It’s a pretty reasonable fee, but the challenge is that you have less control over intermediary bank fees. 

Oftentimes, what I’ll see in those situations, is that the recipient gets less and some of these suppliers won’t start working until the total amount is paid. 

I’ve had to send wires for 7 Euros because there was a fee not covered. 

The company refused to start any work until the 7 Euros was received. You have more control over those kinds of experiences, as well as any due diligence when you’re sending it directly from a bank instead of TransferWise.

When to Use TransferWise

TransferWise can play a role in your global personal needs to move money overseas but it likely won’t be the only tool in your belt that you should use. TransferWise is very good for sending money for property transactions, funding a bank account opening overseas where you’re moving money in different currencies, or for sending money to your foreign bank accounts. 

TransferWise is great for things like that.

But if you’re operating with any level of sophistication, whether it’s interesting countries that are more scrutinized or more sophisticated or larger transactions, having an actual bank is going to be a lot easier to navigate, easier to understand, and more helpful in going through the process of due diligence. 

They’re going to make sure that the right amount of money was received in the person’s account and you’ll develop that relationship that allows you to be in more control of what’s happening with your money and transfers.

So, is TransferWise safe? Yes, to an extent. It is a great option for many different financial transactions. But if you are operating at higher levels or have the ability to open a local account to conduct your business in a given country, that is usually the better option.

Andrew Henderson is the world’s most sought-after consultant on international tax planning, investment immigration, and global citizenship. He has personally lived this lifestyle for over a decade, and now works with seven- and eight-figure entrepreneurs and investors who want to “go where they’re treated best”.

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