Hi, I’m Quinn Askeland. In 2016, I started Transumo after experiencing expensive, slow, and frustrating international transfers and payments through banks. My mission is simple: to help others simplify and reduce the cost of transfers and payments. Fortunately, today, there are excellent alternatives for international money transfers and payments. See My Full Bio.
In our testing against Reuters the Wise exchange rate we found it is extremely close to if not the exact mid-market or interbank rate.
Wise calls it the “Real” exchange rate. But Wise is not a charity.
So how do they make money and most importantly can Wise save you money?
And who might be better?
Let’s get stuck in!
Disclosure: This post contains affiliate links and potential savings on transfers if you use some of the links! For more information, see my disclosures here.
1. The Wise Exchange Rate
With over 196,000 reviews on Trustpilot, Wise has earned a “Great” rating of 4.2/5. Customers love how fast and easy it is to send money abroad with Wise. They also appreciate the low fees and fair exchange rates that Wise offers.
Wise claims it uses the mid-market rate or interbank rate.
To this, they add on a fee.
More about the fees they charge in a moment, the first thing we need to check is whether they actually use the mid-market rate.
Mid Market or Interbank Rate
Major financial institutions – like banks and licensed money transfer companies – are willing to pay a certain rate when they exchange currencies (buy or sell) amongst each other. The mid-point of their buying and selling rates is known as the mid-market rate and is considered the fairest rate for currency exchange.
This rate is more or less standardized, but sometimes it can differ between large financial organizations who use different data sets to fix this rate.
Wise says they pull their rates from Reuters (very reputable) in real time while the market is open and offers this rate to their users to send money to over 160 countries worldwide.
In fact, you can see the rates you’ll get on Wise on their currency converter for yourself.
Let’s see whether Wise’s rate differs significantly or at all from the mid-market for their most popular currency pairs.
|Currency Pair||Reuters Mid Market Rate||Wise Rate|
|USD – EUR||1 USD = 0.8945 EUR||1 USD = 0.8954 EUR|
|USD – CAD||1 USD = 1.2737 CAD||1 USD = 1.27345 CAD|
|USD – PHP||1 USD = 51.1700 PHP||1 USD = 51.115 PHP|
|GBP – EUR||1 GBP = 1.2016 EUR||1 GBP = 1.20185 EUR|
|EUR – INR||1 EUR = 83.6370 INR||1 EUR = 83.7086 INR|
|EUR – PKR||1 EUR = 197.1030 PKR||1 EUR = 197.239 PKR|
|CAD – INR||1 CAD = 58.8263 INR||1 CAD = 58.8927 INR|
|AUD – INR||1 AUD = 52.5460 INR||1 AUD = 52.6628 INR|
As you can see, Wise the mid-market rate and the mid-market rate from Reuters are pretty much identical. The difference could simply be accounted for by a lag in testing.
Try it for your currencies.
Here is the Reuters mid-market rate (opens new tab)
Compare with the current Wise rate(opens new tab)
So how does Wise make money, and most importantly: Are they cheap compared to banks and other money transfer companies?
You might also like How Wise Works
2. How does Wise Make Money?
As you can see above, Wise rates and Reuters exchange rates can be considered identical – which means, they do offer the “real” mid-market exchange rate and don’t build a fee into the exchange rate (which others do).
But they do have fees:
1) Sending Fee
2) Transfer Fee
The Sending Fee is based on the method used to fund the transfer.
The Transfer Fee is a variable percentage fee based on the amount and currency pair.
We recommend you do this for yourself here (opens a new window) and follow along with this example:
Here the Total Fees are very low. $6.40 is just 0.64% of the amount sent.
Compared to a bank, $6.40 is just a fraction of the fees that would accumulate in total when using a bank. The total fees for a bank could easily be more than 10% or $100 when all fees are taken into account (see 4 fees below).
Also note: Wise’s percentage fees go up as the amount increases, which in our view makes them ideal for smaller transfers below $7000 USD/£4000 GBP/€4500 EU/$9500 CAD/AUD.
For larger international transfers (above these amounts), we generally recommend OFX (see review) which charge less in percentage terms as the amounts increase.
TorFX (see review) (UK/Australia/NZ/Asia) and Currencies Direct (see review) (North America/Europe) are also top picks of ours if you prefer to do things by phone or simply want the best customer service.
3. How Does Wise Compare with Banks and other International Money Transfer Services?
Wise is the only licensed international money transfer company that lets their users send money abroad at the mid-market rate without currency conversion fees.
But as we showed you above, they do charge a couple of other fees to stay profitable.
Here are the four fees you need to watch out for when you’re sending money abroad with any money transfer company or bank
1. Sending fee
This is the fee charged by your bank or card issuer (not by your money transfer company) when you fund your transfer.
Wise minimises this fee by having local bank accounts in the areas they service. In the example above, Wise offers ACH as an option. ACH is a very inexpensive way to fund transfers from banks in the USA but Wise has the equivalent in all countries it operates.
Banks by comparison often charge between $10 and $50 for this fee alone because they are making a Wire transfer through SWIFT. Here are some examples: U.S. Bank $50, Bank of America $45 for USD, Barclays up to £40, NatWest up to £15,TD $40 USD, RBC $35 and Commonwealth $12 online/ $30 in branch.
To help explain this fee, you might like ACH Vs Wire Transfers
2. Transfer fee
This is the fixed or percentage-based service fee charged by your bank or money transfer company, and this depends on a lot of factors including, funding method, payout method, transfer speed, etc.
This fee is the main fee for Wise, but compared to similar services it is very competitive. Most money transfer services make this fee zero and many say “Fee Free” or something similar but usually the majority of the fees are built into the exchange rate they offer (next).
3. Exchange rate
This is the rate at which banks or money transfer companies let you exchange the currencies you want to transfer.
Banks often charge around 2% – 3%. For larger amounts this is very expensive. $100,000 for example can be $2000 compared to money transfer companies which often are as low as 0.5% or $500.
Other money transfer services build a margin into the exchange rate which amounts to between 0.5% and 2% usually.
Wise has zero fees built into the exchange rate as we showed above when comparing Reuters feed with that of what the Wise website was offering.
4. Receiving fee
This is the fee charged by your recipient’s bank or a receiving agent (especially in the case of cash).
Again, Wise almost always removes this fee by having local bank accounts in the areas they service.
By comparison if you use a bank and some money transfer services this fee is usually charged by the receiving bank and can be quite significant.
You might also like: Is Wise Safe?
4. How Do You Lock in the Best Exchange Rate?
As it turns out, Wise is our top pick for smaller transfers (below $7000 USD/£4000 GBP/€4500 EU/$9500 CAD/AUD).
The exchange rate for Wise are the best you find because they pass on the “real” rate.
They do have fees though, and as we have shown Wise is excellent at being transparent.
Most importantly at the end of the day – the total fees is what really matters and in this regard Wise is a shining light.
But don’t take our word for it – we recommend using the Wise calculator here to see for yourself what you can expect to pay in fees.
For larger amounts, we recommend OFX (review) for a number of reasons, not least of which being that they reduce the fees in percentage terms as the amounts increase.
Wise is our top pick for most people with smaller amounts. If you want to know more about Wise don’t miss your Wise Money Transfer Review.