Expats have traditionally faced barriers and challenges when trying to transfer money abroad, often due to the cost involved and the time it takes to process the transaction. These are problems that are usually associated with traditional bank transfers, and fintech platforms are trying to address these issues.

Fintech companies are becoming increasingly popular as a way of transferring money quickly across international borders. This article aims to look at the pros and cons of the available options, to help expats make better choices when it comes to their money.   

Understanding the options

The two main options that are available for expats to transfer money internationally are traditional banking institutions and fintech companies, which often have mobile phone apps to make it more convenient for their users.

Traditional Bank Transfers

Much of the traditional banking space uses the SWIFT system to send secure money transfer requests. This system is very secure, but it can be a slow method of doing business. Society for Worldwide Interbank Financial Telecommunication, or SWIFT, isn’t a bank in its own right and doesn’t actually handle money; it only acts as a messaging service for the banks that are its members.

Complex layers of regulation cover bank transfers, and this can also contribute to the amount of time that it takes to process transactions. The level of regulation makes bank transfers very safe as a means of money transfer, but also not the quickest. These can take anywhere from 1-5 days, typically.

Fintech Platforms

These are the newer players in the scene, utilising new technologies to both make for secure transfers of money and improve the speed at which the money is moved. These typically will not be part of SWIFT or any of the more antiquated systems that the traditional banks are a part of. It is normal for fintech platforms to engage with their user base via phone apps and websites.

BOSS Money is one example of a fintech platform that allows users to send money from the US to many counties across the globe. This service is considered to be highly secure and is compliant with money transfer regulations.

Fintech platforms have the room to innovate, with some incorporating the same blockchain technology that underpins Bitcoin to make their security almost impossible for hackers to penetrate.

Key comparison factors

Fees and Exchange Rates

The way that banks and financial institutions structure their fees can be complex and confusing, and they will often add foreign exchange fees on top of the flat fees that they already charge. By way of contrast, most fintech companies tend to be very upfront in their pricing and make it obvious how much the customer is going to pay before they do.

Speed of Transfer

The speed of transfer can vary for fintech companies, but they are anywhere from instant to a couple of days. Banks typically take anywhere from a day to five days to process a transaction, primarily due to the complex systems and steps involved.

Accessibility and User Experience

Banks will often have physical branches that customers can walk into and talk to a customer service agent. They will also usually have a phone number to call in case of problems and dedicated support teams to deal with technical issues.

This can be great if you have the time to visit an in-person location, but many fintech companies have excellent websites and apps that are better than those offered by traditional banks. They will often have superior usability and will be far more convenient to use.

Flexibility and Features

Many fintech apps offer superior features compared to their banking counterparts, making it easier to send and receive money with people in your network. Fintech apps will often allow you to message the recipient of the money, explaining why you are sending it, or to include invoices directly within the app when requesting payment.

Security and Trust

Many people have built a relationship with their banking partners over many years and have faith in the integrity and security of their systems as a result. Brand loyalty can result from this and be a factor in who they choose to partner with.

Governments often have regulations in place that guarantee your money in the event of a bank collapse or failure to meet customer obligations. This is something that has yet to be extended to most fintech companies and is a reason why many choose to send larger transactions via established banks.

Most fintech companies are already fully compliant with anti money-laundering legislation,  Know-your-customer (KYC) requirements, and are regulated by Government agencies around the world. Many have excellent security measures in place client-side and this includes facial recognition and multi-step verification processes.

It is always wise to check which security measures are in place to keep your money safe when using a company you haven’t done business with before.

Pros and Cons Summary

When Banks are Better

• If you want to speak to someone in person.
• When you need to move large amounts of money safely and securely.
• If your transaction is not time-sensitive.

When Fintech is Better

• If you want a transparent fee structure.
• When you need to transfer money to someone quickly.
• If you appreciate the additional features of the fintech apps.

Conclusion

When it comes to transferring money abroad, expats have to consider a number of important factors. The safety and security of their money is paramount, but both options for transfers are very secure and are subject to Government oversight.

If you are sending a very large amount of money, for example, if you are buying a house in a different country, banks are better equipped to handle such transactions and tend to have government guarantees in place to protect your money.

Fee structures are another consideration, and traditional banks are often not as transparent as fintech platforms when showing what these will be, ahead of a transaction. Because of the lower overheads faced by most fintech companies, they can often offer lower fees.

Both methods of money transfer can be helpful in different situations, and you should choose the one that best reflects your needs at the time.