Digitisation helps consumers save money

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·      Digitisation is the future, experts say because it cuts down transaction costs

·      Expensive transfer fees were experienced by one of TransferWise’s founders

·      Fintechs have been pushing for a cashless economy since as early as 2006

Individuals who regularly send money abroad can get the best exchange rates by transacting online, according to finance experts, since digitised transfers do not need employees to key in important details manually.

Fintechs have been pushing for digitisation for a while now and their innovative solutions have cut down fees as the only thing they need for their operations is a reliable platform. They only have a few employees too which translates to lower overhead costs. Banks, on the other hand, need a lot of people to ensure that operations run smoothly and that every customer receives the service he or she needs. Aside from their usual fees for international fund transfers, traditional banks also need to add other charges just so they can make enough money.  

Banks use unfavourable exchange rates to make more money out of their clients too, according to TransferWise’s CEO, a norm that has been dismissed for a long time. While additional fees hidden in spreads is standard procedure, most people who transfer money internationally through banks do not know just how much is being taken from them. All they know, according to experts, is that overseas transfer rates are expensive and that they need to look for an alternative method to send money to family and friends.

Exchange rates rarely reflect what most find online. According to an article by The Guardian, banks use different rates in order to make money. In fact, others claim that money changers and banks tweak the prices so that they are in their favour. Interbank rates are published by newspapers and these are the rates that various websites pick up. Apart from rates going up and down throughout the day, financial institutions need to adjust their rates in order for the transaction to be profitable.

It is noted by The Guardian that using online money changers and digital money transfers will save consumers a lot of money. It’s all about not using up anyone’s time, according to experts, as this saves the bank a lot of money.

Back in 2008, Kristo Kaarmann felt “incredibly stupid” for thinking that the money he transferred to his Estonian bank account would be near the interbank rate. In a BBC interview, Kaarmann said: "So I paid my UK bank a £15 fee, and transferred the £10,000, and then a week later I saw that £500 less than I had expected had arrived in the Estonian account." Kristo, now 38, received a hefty bonus at the time. He added that he “foolishly expected” that his bank would give him the same exchange rate that he saw on TV. "Instead the bank had used an exchange rate 5% less favourable, which is how it and all the other banks get their cut. It was my mistake", Kristo explained.


Although banking fees and hidden fees in spreads seem deceitful, Western Union’s CEO noted at a panel interview in Davos that removing banking fees is unsustainable. The comment, according to a Fast Company report, was prompted by Laurent Le Moal’s suggestion of adopting zero banking fees. WU’s Ersek said that they all need to make some money. Observers note that this is the plain truth and the only industry that can get rid of these fees are challenger banks the likes of Transferwise and other well-known fintech brands.


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Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO at FXcompared and has numerous years of experience in the international finance world, especially within the media, technology and property sectors. Daniel is passionate… Read more

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