UK-based TransferWise challenges banks by allowing money transfers to China for just 1.5 per cent fee
Company expects 50 million overseas Chinese to send money back home ahead of February festive season, plans to launch transfers out of Hong Kong later this year
Peer-to-peer money transfer platform Transferwise has launched low-cost money transfers to China as it seeks to expand its financial technology services in Asia, it said on Wednesday.
The UK-based company now allows customers to send money to China UnionPay bank accounts from 14 currencies including the US dollar, euro and British pound. It said a 1.5 per cent charge will be levied on each transfer. It takes one to three days to deliver the money.
This compares to an average fee of 9.8 per cent charged by other banks and companies to send money from the UK to China, according to TransferWise.
“For consumers to be paying nearly 10 per cent to transfer money between two of the world’s largest economies is simply unjustifiable,” said Nilan Peiris, vice president of growth for TransferWise.
Some rivals offer competitive rates - but only for smaller sums. Western Union, for example, charges anywhere from 2 per cent to 9 per cent, depending on the specific service used and amount sent.
Meanwhile, Barclays bank charges a flat rate 15 pounds (US$21.50) for international payments online or 25 pounds for the same service handled in person at one of its branches.
The latest move by TransferWise comes just ahead of the Spring Festival break, the biggest holiday of the year in China that begins this coming Monday.
TransferWise hopes to entice millions of overseas Chinese to send money back home for the holidays via its platform.
“It’s incredibly exciting for us to be able to offer an alternative that is exponentially better in terms of both cost and convenience to such a large group of consumers,” said Peiris.
TransferWise avoids expensive bank transfer charges by holding a reserve of money in each of its markets. This is used for receiving and transferring funds locally. Transfer charges range from 0.5 per cent to 2 per cent of the sum of money transferred or received.
For example, a customer in Estonia who wishes to send 500 euros (US$546) to a bank account in China will transfer the money to TransferWise’s designated Estonian bank account, with a 1.5 per cent fee deducted from the original amount.
Instead of then transferring the remaining sum internationally to China, which could incur hefty transfer fees, TransferWise sends the equivalent amount in Chinese yuan from its account in China to the recipient’s UnionPay account.
The company claims to give customers a better deal by using the real mid-market rate for conversion instead of the less attractive telegraphic transfer exchange rate - determined by banks - that is often offered by financial institutions.
Jo White, director of communications at TransferWise, said the company is hoping to allow customers in China to send money from their domestic bank accounts to those located in other countries by the end of the year.
White said the company is also looking to launch money transfers from Hong Kong by the third quarter. Money transfers from other currencies to a Hong Kong bank account are already being serviced by the platform.
“Hong Kong has a lot of people who would like to be able to transfer money in a better way,” said White.