How does TransferWise (now called Wise) work?

What is TransferWise — now called Wise

TransferWise, which recently renamed itself Wise, is essentially an online account where you can send money abroad or get paid in other currencies, and spend abroad on their Wise debit card.  

The company started out as a simple overseas money transfer service in 2011. It was co-founded by Taavet Hinrikus (one of the founding members of Skype) and Kristo Käärmann (an experienced financial services consultant). Wise headquarters are in London, but the company now has offices all around the world.  

How does Wise work?

When you want to send money abroad with Wise it feels like the money is going straight from your bank account into your recipient’s account.

In fact, there’s a bit more going on behind the scenes. Wise has accounts all over the world. When you want to send money abroad, you actually pay with your local currency into Wise’s local account. Then the Wise account in the overseas country you want to send money to will send local currency to the recipient. The money you pay never actually crosses borders.

For example, imagine you are sending money from the UK to family in the US. You would log in to your Wise account and link it with your British bank account, you would also enter your US recipient’s bank details.This is just like setting up a new payee in your bank account.

When ready, Wise will transfer the requested amount of British pounds (£ GBP) into their own UK account. Wise would then alert its US account, which would then send the agreed amount of US dollars ($ USD) to the recipient.

The company makes its profit through fees on these transactions, which are clearly calculated upfront before any commitments are made. You can use their converter on their home page before you even have to register.

TransferWise features

Competitive, transparent money transfers

International money transfers have always been the headline capability of TransferWise, or Wise. It is not the only company to offer these services, but as a long-time user, I can attest that their platform is remarkably simple, easy to use and their rates have always struck me as both reasonable and transparent.

That’s no accident. Wise takes pride in offering a seamless user experience. It also boasts that it is 13x cheaper than traditional exchange services. In combination, it is no wonder it has grown in international popularity — and become one of the world’s most valued financial technology startups.

Currently, users can transfer money in their local currency or over 50 different currencies. To be precise, Wise supports users to send and receive money from a list of 22 currencies. And users can send money (no receiving) in another 27 currencies via local transfers.

The transfer recipient doesn’t need to have a Wise account — all that’s needed to set up a transfer is their regular bank details.

The company also prides itself on no hidden fees and full transparency. While different transactions in different currencies will have different fees, this can be easily checked on the homepage or whenever you make a transfer as the fees will be clearly shown upfront.

Best of all, their exchange rate is based on the mid-market exchange rate unlike many banks that charge above-market in addition to adding their own fees. This mid-market or real exchange rate is always in the middle of the buy and sell rates on the ever-changing global currency markets.

When you want to convert your money or pay someone, they will clearly tell you how much you are charged for the transaction. They also lock in the exchange rate they’ve advised before you hit send so the rate doesn’t go up before your money reaches them. They call this the ‘guaranteed rate’.

Multi-currency accounts

The recent name change to Wise reflects that the company now offers much more than transfers. International accounts are now their main product offering — and this is exciting news for anyone with an international network and lifestyle.

Many of us now live, work and travel around the world, or simply have friends and family that do. However bank accounts generally don’t, and are constricted by geographic borders, making some financial interactions awkward and costly.

Wise’s multi-currency account is heaven-sent in this regard, because for most of us with fairly straightforward international transfer needs, this account makes all those hurdles problems of the past.

Wise’s multi-currency account (which used to be called the TransferWise borderless account) is a bit like having multiple overseas bank accounts. It lets users hold money in over 50 currencies.

As an example, let’s say you have British pounds (GBP), euros (EUR) and Australian dollars (AUD) in your Wise account. If you want to transfer money to a euro account, Wise will use your euro balance automatically. If you are transferring more euro than you have, Wise will automatically convert some of your other currency to cover the difference.

Then let’s say you are receiving money from an Australian bank account, you can look up your unique AUD account details in Wise so you can receive the payment in AUD. Just like you had a bank account in all those different countries.

If you are finding one of your balances too low, you can always convert one of the other currencies you have in Wise or you can simply transfer money into your Wise account from a credit card, debit card or by bank transfer or Swift transfer.

All money transfers you make come with a fee but you will be told upfront about these whenever you make a payment or transfer.

Your multi-currency account comes with a debit MasterCard that you can use like you would any other bank card. The debit card costs £5 upfront when you order it. You won’t be charged for any card transactions as long as you have the relevant currency in your account.

Yes, it does contactless payments, too. You can use your card with Google Pay or Apple Pay. So you can ditch your travel money cards.

With Wise, you can view your currencies, and spend money through both the desktop version and the mobile app version. You can also withdraw money from ATMs but it’s best to check the local charges depending on where you are.

Business accounts

If you want your business account to operate globally, and across different currencies, the Wise Business account could have you covered.

The business account might be good for sole traders who tend to send and receive payment in different currencies without high recipient or conversion fees. Equally, as a small business, you can pay invoices and pay people abroad in their local currency. In fact, it lets users pay 1,000 people at once (without facing x1000 transaction fees).

The business account has many of the same features as the individual multinational accounts. For example, users can move their money between accounts and across currencies as needed. The company gets a debit card and can use apps to help track expenses and set up direct debits.

Wise has different business account offerings for sole traders, small to medium sized businesses and large businesses. For those looking to save time on admin, Wise’s business accounts also integrate with the online accounting software Xero.

When Wise may not be the best fit

Arguably, Wise is best for users who plan on mostly transferring smaller amounts. The more money you send, the higher your fees will be as they are based on a percentage of your transfer.

Wise also charges different amounts for each currency so it is best to check how much the fees add up to before making the payment. In some exchanges, you may be better off using a competitor.

Consider your transfer volume as well. You will rack up higher fees if you transfer more than £4,000 in one go. However, there is a ‘monthly volume discount’ if you are sending more than £100,000 over a month.

Speed may also be a consideration. The time the transfer takes will vary on what option you choose, such as debit or credit card, bank transfer etc. Also, if sending large transfers, these might need additional ID checks and a longer processing time which means that Wise isn’t the best option if you need to send a large amount urgently.

And plan ahead. Before you can make your first transfer you have to get your ID checked by Wise. While they have a fairly quick turn around, be mindful that this may delay your first transfer.

A final consideration is that your recipient must have a bank account, as users can only send money electronically. Wise does not offer cash pick up features.

Wise competitors

If you are making one-off transfers, it is always good to check competitor rates. For example, look at Paypal, and money transfer services like WesternUnion. Most banks also offer international transfer services — if you’re having trouble finding that information on your bank’s website, don’t be shy about calling them up to ask them what their rates are.

For a list of money transfer companies and rates, check out: https://www.finder.com/uk/international-money-transfers

Keep in mind that different companies have different rates, ID checks, setup times as well as transfer speed, and they may use different foreign exchange calculations and have extra fees which can impact your total cost.

Another element to keep in mind and help make your decision is user ratings. Most reviews praise the speed and ease of transactions. Here’s how Wise ranks on the following rating sites:

Is Wise safe?

Wise is a well-established financial company that is in compliance with financial regulations in all of the countries (more than 170) that it operates, including the US and UK. Financial agencies in these countries have strict standards that protect users and their money.

It can also be noted that Wise uses a “safeguarding” technique, which means that all of the money in your accounts is kept separate from any of Wise’s business accounts. This means that should Wise have financial troubles, your money would still be completely safe in your account.

Getting started 

Like many financial services and products, it can be hard to understand how they work until you start using it. If Wise seems like a fit for your needs, accounts are free to open.

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Disclaimer

All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

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