International Money Transfers - October 3rd
The “Big Mac Index” was invented by The Economist back in 1986, as a way to simplify exchange rates theory for the general public. Also known as Burgernomics, the Big Mac Index judges the value of a country's currency against how much a Big Mac costs to buy in that country compared to other countries - i.e. the exchange rate.– Read more
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International Money Transfers - April 20th
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Canstar News - March 20th
Western Union Country Director Simon Millard lays out the case for collaboration between banks and fintechs in the face of disruption.– Read more
International Money Transfers - February 8th
Contributed by Robbie Sampson, CEO, Orbit Remit However, every year we are essentially throwing away money on unnecessary transfer fees by not doing our research. Last year Aussies spent in excess of $5.8 million in unnecessary fees…– Read more
An international money transfer is when you send money from your bank account in Australia to the bank account of someone you know in a different country.
International money transfers are popular for both large and small amounts. Globally, the World Bank estimates that in 2017 approximately $596 billion will be sent in remittances (people who send money as a gift to people they know overseas). In 2018, this number is expected to reach $616 billion.
When making a money transfer, you will usually need to know the other person’s full name, address, account number, and Branch Number or Bank Identifier Code (SWIFT BIC or IBAN).
To find out whether your Australian dollars will equate to much in the local currency of the country to which you’re transferring money, check our list of 10 currencies the Australian dollar has risen against.
The government’s Study In Australia website says Australia is the world’s third most popular destination for international students. And no wonder! We have more than 1,200 tertiary education institutions, with over 22,000 courses to choose from, and our university system ranking is ninth in the world, ahead of Japan, New Zealand, and Germany.
According to Australian Education International, there were over 577,353 international students in Australia by the end of August 2017, which represented a 14% increase on the same period for 2016.
Useful resources for students:
There are two types of overseas workers: Australians working in a different country, and people from other countries working in Australia.
Australians are used to FIFO jobs (fly in, fly out) that require them to work in a different country to Australia. This can mean sending money back home to pay your expenses while you’re away working hard.
At any given time, there are several hundred thousand working holiday visa holders and temporary skilled (subclass 457) visa holders working in Australia. As of 31 March 2017 there were 95,360 primary visa holders in Australia (457 visas). Working visa holders will often send money back home, either for their family or to cover ongoing expenses.
The countries responsible for the highest numbers of 457 visa holders are a mix of both high-income countries and LMICs. As an indication, the four countries with the largest number of applications granted as of March 2017 were:
No matter what country someone is from, if they are working somewhere other than home they may occasionally need to send money back home. This type of international money transfer is called a “remittance”.
Useful resources for overseas workers:
Remittances are also sent home from international migrants living and working in a country apart from their family. In 2017, there were 250 million international migrants (World Bank, Bilateral Migration) living and working away from home with many regularly sending small amounts of money back to the family that helped them secure a better future. When it comes to developing nations, remittances sent to low- and middle-income countries add up to $450 billion per year (World Bank, 2017), which helps communities grow resilient against poverty in the poorest developing countries of the world.
Unfortunately, many developing nations allow a monopoly for international money transfer providers, so that they can charge massive fees on these small amounts of money.
Moving overseas temporarily or permanently is a popular option for many Australians. For many, it is short-term option and they may need to send money home to Australia. The Australian Bureau of Statistics Social Trends data found that in 2010, 80% of those who had planned to leave Australia permanently didn’t stay away – they returned to Australia within 12 months.
Returning home may mean leaving behind investments and savings in the other country, necessitating a transfer of funds either to or from overseas.
Useful resources for returning expats:
In the year ended December 2016, Australian residents took a record 9.9 million short-term overseas trips (ABS). When family members travel, there is always a risk they might run into trouble – or out of funds. A fast and efficient money transfer service can become essential, especially if the person in question is without their wallet!
As for family and friends who live overseas, the idea of organising to send a Christmas or wedding gift internationally can be daunting. It might be easier to send them some money so they can get something they really want.
Useful resources for those with family who are travelling:
As commerce goes global, businesses may find an increasing number of their transactions are being conducted overseas. With a range of international commerce hot spots including China, the US, Japan and many more, it’s important for businesses to be able to send money overseas. It is also worth knowing related tax requirements.
Useful resources for businesses:
The exchange rate is the ratio at which the Australian dollar will buy a different currency, which determines the value of our currency and theirs by comparison. For example, the exchange rate from AUD to USD at the time of writing is around 77 cents to the dollar (November 2017).
If you’re not familiar with the common abbreviation codes used to refer to different countries’ currencies, you should take a look at our list for Australia’s top 20 destinations, which include the following:
The table in this article outlines the cost of exchanging $15,000 at the highest exchange rate and at the lowest exchange rate of the international money transfer products researched in our 2017 report, as at October 2017. As you can see from the article, the exchange rate can vary significantly between providers. That’s why it’s so important to compare exchange rates.
|5-Star||USD 11,748||GBP 9,070||NZD 16,076|
|Majors||USD 11,267||GBP 8,687||NZD 15,535|
|Difference||USD 481||GBP 382||NZD 541|
|AUD Equivalent||AUD 631||AUD 652||AUD 515|
Source: Canstar.com.au based on exchange rates as at 25 October 2017
Our tip? Set aside plenty of time to make a short list of providers and check their rates over a number of days before choosing who to finally go with.
The main fees to be aware of include the following:
The minimum, maximum and average fees we found in our latest star ratings are outlined below. The maximum fee you could pay is twice as much as the minimum! Thankfully though, there are many providers that do not charge fees for cancellations, amendments, or enquiries.
In Canstar’s 2017 International Money Transfers star ratings assessment, we found the following minimum, maximum and average fees across the 19 products assessed for the rating:
|Sending fees||Cancel fee||Amendment fee||Enquiry fee|
Source: Canstar International Money Transfers Star Ratings 2017
Hot tip: A little bit of homework goes a long way when it comes to exchange rates and transfer fees, so you should compare your shortlist of institutions using our ratings before picking one. Every institution makes a profit somewhere, but you can make sure that more of your money goes where it should – to your recipient, not your institution.
There are a lot of different ways to send money internationally from Australia, as it is a growing and competitive industry. So what the pros and cons of different methods?
The vastness of the internet means there is more than one way to transfer money online:
You can get an International Money Order (IMO) from your bank or post office. It is similar to a bank cheque in that you post it overseas and it gets cashed at the other end by your recipient.
You should always ensure that the person you are transferring funds to is legitimate, especially if you don’t know them personally. It can be difficult, if not impossible, to recover funds sent overseas to a scammer. The government’s Scamwatch website has some tips on common scams to watch out for, such as scams saying you’ve come into an inheritance from an overseas estate or won a travel holiday as a prize.
Also, check out our tips and traps of currency exchange.
The Australian system for sending money between countries is pretty good, but that’s not the case in every country. When it comes to remittances for international migrants sending their pay home to families in developing nations, there are many barriers in the way.
According to the World Bank, remittances that are small in amount can hold great value by reducing the level and severity of poverty in a region. Remittances can help communities grow resilient against poverty in the poorest developing countries of the world. This leads to:
We know that around $429 billion in remittances was sent to developing countries in 2016 (World Bank, 2017) – often from workers in other developing countries! These remittances provide three times the amount of global foreign aid declared by governments, and they do so much good in local communities.
Remittances act like insurance for poor countries. When times are hard for the family, workers send more, not less. For example, in Nepal, the percentage of poor people has been declining drastically even during a time of political and economic crisis, because of remittances sent from family members living in India. The poor in Nepal made up 42% of the population in 1995, but just 10 years later in 2005, that had lowered to 31%.
When natural disasters hit, remittances can get there before foreign aid does, such as in Somalia and Haiti. What’s more, those who send remittances don’t “forget” about the crisis their family is going through when the nightly news stops reporting on it. These remittances keep coming, a lifeline for a community that has been struck down, as we can see from Haiti being in the top 10 for remittances contributing to their GDP (see above).
Children benefit from fewer debilitating signs of poverty when their families receive remittances. Children who received remittances have been reported with higher birth weights and lower school dropout rates in Mexico, Sri Lanka, and El Salvador.
In many countries, it “costs big to send small” and since remittances are typically small amounts – $200 per month or so – flat fees and charges can take a huge chunk out of much-needed money.
Globally, this fee amounted to 7.45% of the remittance in 2017. In Africa, the fee to send money between countries was nearly 10%.
Furthermore, many governments allow one international money transfer company to make an exclusive monopoly agreement with the post office, so that they are the only available option for sending money. So even if you wanted to shop around for a better exchange rate and cheaper fees, you couldn’t find one.
Remittances decreased in their rate of growth in 2016 for the second year in a row because of the weakened economies in Europe and Russia, according to the World Bank. Other regions to show slowing growth are the Middle East and North Africa, Sub-Saharan Africa and South Asia. Meanwhile, remittances to Latin America and the Caribbean have been increasing after economic recovery.
There are cheaper options that could make a big difference around the world. For example, the U.S. Federal Reserve Bank started a program with Mexico where money transfer companies could send money to Mexico for a fixed cost of only 67 cents per transaction.
In his TED talk in 2014, international migrant Dilip Ratha recommended that governments and Reserve Banks worldwide take the following steps to reform the remittance industry:
Here at Canstar, we compare institutions based on the features they offer and the cost charged to make a transfer, including fees and exchange rates. These ratings make it easy for you to make a shortlist of options for making an international money transfer by indicating which institutions provide better value.
So what do we look for?
The provider with the highest average exchange rate receives the top score in this category. We rate institutions for their exchange rates on the following currencies:
We’ve mentioned above the various costs in fees and charges for making an international money transfer. You can assume that the providers we’ve given a 5-star rating provide better value to send money overseas.
Canstar assesses the financial outcome of making an international money transfer through each provider – how much money gets to your recipient after the exchange rate and other fees and costs are charged? We assess each provider for two transaction scenarios:
Canstar rates international money transfers provided by ADIs (institutions that are officially approved for banking in Australia) and non-ADIs. So you know that every institution on our list of ratings is a reputable source.
Apart from the basics, we also look at whether an institution provides:
Please note that these are a general explanation of the meaning of terms used in relation to international money transfers. Your provider may use different wording and you should read the terms and conditions of your product carefully to understand what fees and charges may apply. Refer to the product disclosure statement (PDS) from your provider for their definitions of terms.
Account number: The identification number for your account, or for the account to which you are transferring money. When making a money transfer, you will usually need to know the other person’s full name, address, account number, and Branch Number or Bank Identifier Code (SWIFT BIC or IBAN).
ADI (Authorised Deposit-Taking Institution): An institution authorised and accredited to provide banking services and receive and manage deposits in customers’ accounts.
Balance: The amount of money remaining and able to be spent in your savings or transaction account at any point in time.
Conversion fee: A fee charged to convert one currency into another before or after transferring.
Conversion rate: Also known as the exchange rate.
Currency: Money. See our list of currency codes around the world here.
Exchange rate: The ratio at which one currency buys another, which determines the value of one country’s currency by comparison to another. For example, the exchange rate from AUD to USD at the time of writing is $0.73 to the dollar. Be sure to compare exchange rates before choosing an international money transfer provider.
Foreign currency: The local currency of any country outside Australia.
GST: Goods and services tax charged on purchases made in Australia. Certain internet purchases may also be subject to GST.
Internet banking or online banking: Banking that is done via the internet on a computer or mobile device. We research and rate online banking platforms on our website.
Transfer: To send money from one account to another.
Visa: A document from the government of a country that grants permission for a person to come to that country to holiday, live, work, or study.
The following international money transfer providers were included in our star ratings comparisons at the time of writing and details are correct as at that time. Please check the current terms and conditions of transfer providers before making a choice of provider.
Compare International Money Transfers using the selector tool at the top of this page – simply select the destination you wish to send money to.