Sending money across borders is still a nightmare, but there is light at the end of the tunnel. In recent times, we’ve seen some new financial platforms in the form of instant currency exchanges that are popping off.
So, the question is quite simple – is it better to use instant currency exchanges or go with traditional bank transfers? Well, there isn’t a simple answer to this question. Why?
Well, just because it depends on where are you sending the money, the amount, and how fast you’d like them to arrive.
Let’s analyze both of these methods and find out the advantages and disadvantages of each.
Speed
Let’s start with the thing that most people want, speed! Instant currency exchanges like Genome, as the word suggests, are instant. Okay, the process might not happen in the blink of an eye, but it usually takes a couple of minutes to a few hours depending on where you are sending the money. On the other hand, traditional bank transfers are slow.
Usually, it takes the bank 2 to 5 business days for the transaction to clear, and in some cases even longer if there is a weekend or holiday. That’s just unacceptable by today’s standards, right?
But why the delay? Well, banks use intermediary banks to process international transfers, and each one takes a cut and adds time to the process. So, it’s not only slower but also more expensive.
So, if you want to send money fast, instant currency exchanges are the way to go.
Fees
Nobody likes fees, let’s get things straight, but unfortunately, we have to pay them. Now, we have to choose the best way that has lower fees, especially for international transactions since they can eat most of the money we are sending.
Traditional banks often use flat fees for international transfers, and they are anywhere from $25 to $50 unless you are sending a large sum of money, where most banks will charge you a percentage of the transaction.
But the fees are not the only problem. Traditional banks also make money on currency exchanges, which can be as high as 2-5%. So, if you are sending $1,000 you will pay $50 for the transfer and lose another $20-$50 in unfavorable currency exchanges, and that’s a lot of money. On top of that, they are known for having many hidden fees.
Instant Currency Exchanges, on the other hand, are more transparent. At least they say they are. They usually charge a small percentage fee (around 0.5 to 2%) and in some cases without any fee if you are making a transaction on the platform.
So, if you are sending money through such platforms, it might cost you $10 in fees, compared to $50 with a bank.
On top of that, instant currency exchange like Genome use mid-market exchange rates, so there are no sneaky markups.
This means that instant currency exchanges are way cheaper for making cross-border payments than traditional banks.
Exchange Rates
Let’s talk about one of the most important things, that people don’t usually understand, and banks have a sneaky way of hiding it – exchange rates!
Banks are known for making a lot of money on currency exchanges, and they have a sneaky way of hiding it. Traditional banks often add a markup to the mid-market rate, which means that you get less money.
Plus, they usually do not tell you the currency exchange rate, they are only converting your money and giving you the final value, and you have to do some complex math to find out the rate that they’ve charged.
Let’s say you’re converting $1,000 to euros. The mid-market rate is 1 USD = 0.92 EUR.
- A bank might give you 1 USD = 0.88 EUR, pocketing the difference.
- An instant service will give you the full 0.92 EUR.
Over time, these differences add up. If you’re a frequent sender, instant services can save you hundreds—or even thousands—of dollars.
Convenience
Nobody wants to visit a bank in 2024 or ever. People just don’t have much time; plus big cities are crowded and it is a nightmare to find parking. Now traditional banks also have apps, but they are usually not as advanced as instant currency exchange platforms.
These apps are available 24/7 and you can send money whenever you want.
Security
This is a big one. Both instant services and banks are generally safe, but there are differences.
Banks:
- They’re heavily regulated and insured, so your money is protected.
- However, their systems can be outdated, making them more vulnerable to fraud.
Instant Services:
- They’re also regulated (look for licenses like FCA in the UK or FinCEN in the US).
- Many uses advanced encryption and two-factor authentication to keep your money safe.
Limits and Accessibility
Here’s where traditional banks have an edge. They often allow larger transfer limits, which is great if you’re moving big sums of money. Instant services, on the other hand, usually have lower limits, though you can often increase them by verifying your identity.
- Example: A bank might let you transfer 100,000 in one go, while an instant service might cap you at 10,000 per transaction.
- Accessibility: Instant services are available in more countries than traditional banks, making them a better option for people in remote or underserved areas.
Which Is Better?
If you want speed, lower fees, the best exchange rate, and tech-savvy options that are available 24/7, you should go with instant currency exchange apps.
However, if you are sending a large amount of money (usually above $10,000), then it is better to go with a bank. Why? Well, the fee in this particular case will be only a small percentage of the transaction, and there is no cap on how much money you can send. Just be prepared to wait for a couple of days for the transaction to clear.
Also Read: Why UX Design is Essential for Financial Services in the Digital Age
