If you regularly send and receive international payments, you probably know how expensive these cross-border transactions can get. This is mainly due to several middle parties involved in processing these transactions. Sometimes as many as five institutions.
This setup not only affects the cost of the transactions it also increases the transaction duration. Expectedly, the more institutions involved in processing a payment, the longer it will take and the costlier it will get.
There is an obvious way to solve the two challenges – reduce the number of intermediaries involved in a transaction and dispense with arbitrary costs added as margin on top of exchange rates.
This article will focus on a financial technology (fintech) company that has successfully implemented the two solutions. Wise (which recently rebranded from Transferwise) has managed to offer superfast international money transfers at a fraction of its competitors’ cost.
History of Wise
Wise was initially launched as TransferWise back in 2011. The two Estonian co-founders Kristo Käärmann and Taavet Hinrikus, were looking for a cheaper way to transfer money between their bank accounts. Both lived and worked in the UK. Taavet, an employee of Skype at the time, was paid in Euros while Kristo was paid in Pounds by Deloitte.
Interestingly, Taavet needed to exchange his Euros for Pounds, and Kristo needed Euros instead of Pounds. To solve their small problem, they decided to swap the funds at market rates. Taavet would deposit the calculated Euro amount into Kristo’s Estonia bank account, and Kristo would send his GBP funds to Taavet’s UK account.
The idea was simple, but it was the seed of their business venture that would later be TransferWise. The company still operates with this premise to this day.
It has opened multiple accounts in several countries. When two parties need to transfer funds, the sender deposits them into their local Wise bank account. Wise then calculates the equivalent sum in the recipient’s local currency using mid-market rates. Then Wise will deposit the calculated sum into the recipient’s bank account through the Wise bank account present in the recipient’s country.
Both transactions qualify as “local” transfers making them cheaper and fast. No money crosses borders, and intermediaries are kept to a minimum. Additionally, as mentioned above, Wise keeps the currency conversion costs low by applying a mid-market conversion rate.
Since its launch in 2011, Wise has expanded services to cater to the needs of its growing customer base. These services include a business account, a debit card, and a multi-currency account supporting more than 50 currencies in over 150 countries.
Watch the video: The Wise story
Wise Features and Services
At its core, Wise is a money transmitting service provider. It offers two main products: a multi-currency account and funds transfer both locally and internationally. The former is free while the latter accounts for 100% of the revenues. The revenues are also split between foreign exchange fees and transaction processing fees.
The features discussed in this section only serve to complement the two main services offered by Wise.
#1 Wise transfer
With Wise, customers can send money across borders in more than 66 countries. The process is simple – specify the amount of funds to send, and the service will calculate the costs upfront. The fees are transparent and minimal.
Next, provide the recipient’s details, including their name, address, and bank account details. You can then authorize the transfer allowing Wise to withdraw funds from your bank account connected to it or a debit/credit card to facilitate the transfer.
Wise will provide estimates on the time frame for sending the funds. It breaks down the process into the respective stages and estimates each step. It also shows a graphic of the flow of the funds on your account. The same information is sent to the recipient’s account (if they are Wise customers, otherwise, a link is sent to their email for tracking the transfer).
However, this process only applies to small and medium sums of money. There is the possibility of sending large amounts. In this case, Wise uses more stringent ID and transaction verification measures to process the transaction as provided for by law. It is an attempt to curb money laundering. Therefore to send large amounts, you will need extra verification documents as requested by the service provider.
#2 Multi-currency account
Wise’s multi-currency account (formerly called borderless account) allows users to hold and transact in multiple currencies, including crypto. Currently, Wise supports ten currencies with virtual bank account details allowing customers to receive funds in these specific currencies.
Another 56 currencies are also supported, but these only allow for conversions and withdrawals to respective local bank accounts. This means that receipts are only supported in 10 currencies, but conversions can be done in any supported currency on all Wise accounts.
Here’s the list of the ten currencies that support receipts through unique bank account details:
|New Zealand dollar
For a complete list of all supported currencies and countries, refer to this page.
Watch the video: The Wise borderless account – How it works
Despite its impressive multi-currency support, it’s important to differentiate a Wise account from a bank account. They are not the same, and as we mentioned earlier, Wise is only a money-transmitting service.
Therefore, with a Wise account, you miss out on banking facilities such as overdraft, loan, and interest-earning savings. You can keep as much money in your Wise account for free and for as long as you want, but it won’t earn any interest.
#3 Wise Business account
The Wise Business account is a multi-currency account designed specifically for corporate clients. Just like the retail account, Wise Business also offers features such as access to multi-currency bank accounts able to receive funds in up to 8 major currencies.
Customers can also process invoices, make payments to more than 70 countries, request and manage multiple debit cards, and more conveniently manage their business’ funds using Wise’s mobile application.
Extra features necessary for modern-day business customers, such as API integrations, mass payouts, and access through the Wise mobile apps, are also included. It, however, doesn’t offer an online payment solution such as you would find with a PayPal or Revolut Business account.
Here’s a detailed look at the extra features available to the Wise Business account holders:
- API integrations – an API (application programming interface) is a way for customers to integrate their applications to work with another application. In this case, a Wise business customer can use the Wise API to connect their applications and interact with the Wise business account without logging in. With a Wise API, businesses can automate receipts and payments such as invoice payments, payroll, and standing order executions. They can also track exchange rates and make automatic conversions at favorable rates.
- Mass payouts – a common business need in which customers have to send multiple payments to their teams of freelancers or contractors, investors, and suppliers. Most payment processors such as PayPal offer similar services, but with Wise, the costs are much cheaper, and the process, faster. Wise calls it the batch payments tool. It offers a similar experience to sending a single payment with a multi-currency account and similar features such as a payment tracker and delivery estimator.
- Banking integrations – Wise may not be a bank, but it does offer a complimentary service to banks which often transfer funds across borders. The business claims savings of up to 8x the regular international money transfer costs. This service supports payments to at least 80 countries that use the more than 50 currencies supported. This can be easily achieved using the API integrations, and bank customers do not have to interact with Wise to achieve their goals.
The Wise Business account is not just a payments platform. Businesses also have to process receipts. The account allows for eight different virtual bank accounts that support international receipts with eight different currencies. This is unlike the multi-currency account, which supports ten. The two that are not supported with the Business account are the Canadian dollar and the Turkish Lira.
With a Business account, you can also hold and convert between 56 currencies.
#4 Wise International Business Debit Card
The Wise debit card is available to both retail and business customers. With the Wise Business account, it’s possible to order multiple debit cards for several employees.
To use Wise’s debit card (provided by MasterCard), you need to finance your Wise account. It takes the money out of respective balances. For instance, if the expense is in US dollars, the card will use the US Dollar balance for the payment.
If the US Dollar balance is insufficient to fund the payment, the card automatically uses another currency balance with the most favorable exchange rate against the US dollar. The system automatically exchanges this currency into the USD balance before funding the expense.
The Wise debit card offers several convenient features, such as card management using the Wise App. You can quickly authorize payments, track expenses, freeze and unfreeze them whenever necessary. For cards associated with a business account, extra features such as setting spending limits, tracking business expenses, and controlling payment methods are also enabled.
Watch the video: How does the Wise debit card work
Generally, most MasterCard-provided debit cards are accepted worldwide by millions of merchants and ATMs. However, the Wise debit card has geographical limitations for several countries and currencies.
Customers can only use the card in countries using the currencies supported on the multi-currency and business accounts. This is about 66 currencies used across approximately 150 countries. Check out this page for the coverage limitations of your Wise debit card.
#5 Wise Mobile App
The Wise mobile app is an extension of the Wise web interface allowing users to interact with their accounts on the go. Available on the Google Play Store for Android devices and Apple’s App Store for iOS devices.
Here’s what you can do with the versatile Wise mobile app:
- Send and receive money. You can access your bank details for 10 of the supported currencies on the consumer multi-currency account and 8 for the business account. You can easily copy these and share them with the sender.
- Convert between currencies. Like using the web app, users can currently receive funds and convert them into more than 60 currencies.
- Access to financial statements on all receipts, withdrawals, and expenditures.
- Manage the Wise debit card. You can freeze, unfreeze or order a new card right from the application. The freeze/unfreeze option is a highly convenient feature security-wise. If you happen to misplace the card, you temporarily disable it.
- Payment and receipts tracking. Funds take a while between the sender and the receiver. Using the app, anyone can check on their receipt and payment status. The app provides an animated graphic showing the different stages funds go through to get to the receiver. This feature is also available on the web interface.
- Access to support articles. The Wise mobile app has all the help articles from the support section of the website. You can search and read through hundreds of instruction and informational articles at any time.
- Track direct debits and scheduled transfers. Scheduled transfers can only be set on the website interface, but once it is done, they appear on the mobile interface, where the user can view and track them.
Is Wise Safe? Compliance & Security
When talking about compliance and security, regulations come into focus. Laws are always variable and dependent on the entity and the local authorities. Wise is registered and headquartered in the United Kingdom as an Electronic Money Institution (EMI). It is regulated under the EMI laws as specified by the Financial Conduct Authority (FCA).
In all other markets that it operates, it adheres to local regulations. For instance, in the United States, it’s regulated by the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of Currency; in Singapore by the Monetary Authority of Singapore (MAS); in Australia by the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA); and in Belgium by the National Bank of Belgium (NBB).
Wise is a fully regulated entity, and despite the difference in policies across all its markets, the company has strived to comply with every applicable law.
In terms of safety, Wise takes a different approach to banks. Given that it is not a bank in the first place, it doesn’t have to protect client funds through financial protection schemes. Instead, it opts to safeguard customer funds. Safeguarding entails segregating between customer and business operating funds. This way, the customer funds are protected against company operation risks.
Wise stores the customer funds in established institutions in respective countries in which it maintains bank accounts. For example, in the US, it uses JP Morgan Chase; in the UK, it uses Barclays; Deutsche bank in Germany, and so on. Since these deposit locations are financial institutions, they must use financial protection schemes to protect their customers’ funds. This is double protection for Wise.
Finally, Wise complies with the EU-specific data protection and privacy regulations commonly referred to as the General Data Protection Regulation (GDPR). These regulations prescribe how institutions collect and process customers’ personally identifiable information (PII).
Customer Support & Tools
Wise.com takes extra steps to offer related products to its customers at no additional cost. This shows the level of commitment the company is taking to ensure that their customers’ needs are met. Here are the extra services they provide to their clients:
- Currency converter – this tool allows users to check the amount of funds they expect to get when converting between different currencies using real-time rates.
- Rate tracker – this tool allows a user to set up custom notifications when a favorable exchange rate between two currencies is reached. This notification can be used to trigger a specific action, such as sending funds or exchanging available funds in an account.
- Swift/BIC code search – this tool can search the SWIFT or BIC codes of any bank in the world. These codes are used as bank addresses for international payments.
- IBAN Number – similar to the SWIFT/BIC code checker, the IBAN (International Bank Account Number) checker verifies whether or not a given IBAN code is correctly written. It can also be used to calculate an IBAN code using specific bank account details.
- Exchange rate comparison – a nifty tool used to highlight some of the popular methods to receive international payments. One can input the initial currency and the expected currency. The tool provides a run-down of the costs involved when doing that specific transaction using different service providers.
- Business templates – this is more of a resource than a tool. The section provides essential documents and resources helpful to business owners and freelancers. Some of the available resources include templates for income statements, business plans, freelance contracts, invoices, profit & loss statements, etc.
How to Open a Wise Account
Step 1. Signup for a Wise account
Creating an account with Wise is simple and straightforward. Go on the Wise homepage here, on the top-right is the ‘Register’ button. Clicking on it will bring you to this dialog box.
You’ll notice two options to choose from on the signup page that determine whether you open a personal (consumer) account or a business account. We will focus on the personal account in this guide. The two-minute video below explains how to open an account with Wise. All you need to have to start is one form of ID and your phone or laptop camera.
Watch the video: How to set up an account with Wise
Step 2. Account verification
When it comes to verification, the two accounts will require different documents. Once you fill in the signup form details, Wise will send you a verification email and code to your email account and phone, respectively. Make sure to use an active phone number.
Wise adheres to global KYC regulations and will require various proofs of your identity as part of the verification process.
For a personal account
Here’s what you will need to verify your personal account:
- ID document – there are three documents accepted for identity verification. These are a national identity card, a valid international passport, or a valid driver’s license.
- Proof of address document – this has to match your ID name. Documents accepted for address verification include utility bills, bank statements, local government-issued tax documents, vehicle registration details, or license photo (if your government includes your address on the license.)
For a business account
Business accounts are a bit more complicated and, for that reason, require more documents to verify the business. Some documents you’ll need to verify your business account include:
- Business registration documents showing the company’s location, line of business, online presence (website and social media pages if available), company owners, and directors together with their contact details.
- Proof of directorship of the applicant. If you’re not the director, you’ll need to prove your legal capacity to open a business account on behalf of the company. This stage is similar to opening a personal account, and all the documents listed above may be requested here.
Verification takes 1-2 business days for the personal account and 2-3 days for the business account. It’s typically shorter if the documents are in order, but these are the expected timelines.
Step 3. Account activation
To activate your Wise account, you’ll need to deposit some initial funds into your account. That amount is about $20 or £16 currently. This applies to both personal and business accounts.
For the business account, however, it will be a non-refundable one-time fee. But for the personal account, these are your funds you are depositing which you’ll be able to send or spend once they are received in your account. According to Wise, these initial funds are used to create unique bank account details for the various currencies through which you can receive funds.
Step 4. Send and Receive Money
After successfully creating your account, you’ll obviously want to send or receive funds. Sending is straightforward. There is a conspicuous green button on the top left corner just below the Wise logo after logging in. Click the button to start the transfer setup process.
Watch the video: How to send and receive money abroad with Wise
When sending, in the above field, you have the option to select the amount to send in GBP or the exact amount you would like the recipient to receive. If you input one, the other amount automatically adjusts with transfer costs included.
In the ‘Amount’ screen, you can choose between two options – to send between two currencies, i.e., an international transfer or to send the same currency. The former option will be a little more expensive due to the currency conversion costs involved.
In the screen above, you’ll also notice that Wise shows the fees involved in the transfer as well as an estimate of the time it will take to send the funds. It also highlights the amount of savings you will receive by opting to transact through Wise over its main competitors. The exchange rate shown is the mid-market rate locked for the stated hours, meaning that this is the rate at which the funds will be exchanged if the transaction is processed within that provided timeline.
You can provide the recipient’s email address in the recipient details section if you lack the banking details. Wise will then send the receiver an email asking for their bank details before releasing the funds. If you happen to have the details, input them in and proceed to review the transaction.
At the review step, you have the option to add a reference ID for your recipient to track the transaction easily. Authorize the transfer, and you are done.
Wise will provide a timeline animation showing the transfer’s progression and the estimated time to reach your target. The exact details are shared with your recipient through email.
Sending a large amount of money is a little more complicated. You will need extra documents to verify your identity and the origin of the funds. This could be, for instance, a title document and sale agreements for a property sale matching the buyer details to the person sending the funds. Various transactions will require different proof documents, but generally, any legal documents used during the legal transfer of value may be requested.
Using Wise is cost-effective across the board regardless of what transaction or service you undertake. Some of the fees you will have to pay as you interact with the account include:
- Account setup – 0.40% annual fee charged for holding any amount above €15,000 (in EUR). Everything else is free.
- Debit card – Initial cost = 5 GBP; Replacement cost = 3 GBP. 2 free monthly ATM withdrawals up to £200. Above the £200 limit, you will pay 1.75% plus 50p/withdrawal.
- Receiving funds – free except for wire transfers which will cost 7.50 USD.
- Sending funds – attracts variable fees depending on the amount of funds and the method of payment. Here’s an example of the cost of converting and sending 1,000 GBP to EUR.
Try our interactive Wise’s wire calculator below to find out the cost of you transfer:The true cost of sending EUR to GBP
The costs are relatively cheap according to industry standards no matter which service you use. Additionally, the service is premium, efficient, and the interface intuitive.
Pros and Cons of Wise.com
- It’s cheaper. The biggest advantage to using Wise is the cost savings. Wise charges the least fees amongst its competition and uses a mid-market rate for currency exchanges to keep the costs down. It has also established several local bank accounts across several countries through which it processes payments and receipts that qualify as local transfers. This mode of operation further helps to keep the costs low.
- It’s fast. Certainly not the fastest money transfer service, but its transfer times are extremely competitive compared to traditional channels such as using banks, sending cheques, and Western Union.
- It’s transparent. It is a great feature within an industry full of hidden fees that lead to inflated costs to send cross-border payments. Wise quotes all the fees involved in a transaction upfront—no hidden charges.
- It’s convenient. Wise provides its customers with multiple ways to interact with its interface. There are intuitive mobile applications, a web interface, and a payment debit card that can be used in several countries to make payments and withdraw from ATMs.
- It’s easy to sign up. The account registration process is simple and straightforward. Provide an email address and create a password or use your Google or Facebook details. That’s it. ID verification is necessary, but this stage has been deferred to reduce any fuss when creating an account.
- It’s highly regulated. Wise is registered and regulated in the UK by the FCA. It is also regulated by local laws in all its markets, including FinCEN in the United States.
- Limited coverage. Perhaps the most significant disadvantage to using Wise over its main competition. It is still expanding and so far only offers its services to customers in about 70 countries. Additionally, the Wise debit card is only available to select customers and businesses.
- Not ideal for sending large sums. Wise is among the cheapest money transfers service providers but not so when sending large amounts. It uses a percentage model to calculate fees, and this can get expensive the higher the amount to be processed.
- Limited functionality. Wise offers few products compared to its competition. Essential services such as online payment processing are not yet available with Wise. This may lead potential customers to choose a different company such as Stripe, PayPal, or Revolut over Wise.
There you have it. Our detailed review of Wise money transfer service. A cheap alternative to PayPal, Payoneer, Skrill, and some of the industry notables.
We have highlighted its history, its features, how to open an account, and how to send and receive funds. We hope you are now more informed about the best option you have when sending and receiving international payments.
In terms of costs, you will be hard-pressed to find a more pocket-friendly alternative to Wise. It offers a premium service at a fraction of the competition’s cost.
Wise | FAQs
Is Wise safe to send and receive international payments?
Yes, it is. Wise is a highly regulated money transfer entity based in the UK. It operates according to the FCA regulations, the FinCEN in the US, among other regulators globally. It serves over 10 million customers and has a 4.6 out of 5-star rating on Trustpilot.
What are the fees for using Wise?
The fees vary depending on the service and the amount of money involved in the transaction, but generally, the costs are lower with Wise than its main competitors.
Is Wise cheaper to use than PayPal?
Yes, Wise is cheaper to use compared to PayPal. Wise claims to be up to 19x cheaper to send and receive money through its Business account than PayPal. However, PayPal tends to be faster.
Are there limits to sending money with Wise?
For most people using Wise, there are no limits to how much they can send or receive. However, for larger amounts, the transactions will be subject to extra scrutiny to prevent theft and money laundering.