Just relocated? Here’s how international money transfers work

How international money transfers work

It’s taken months, but finally, you’ve settled in the United Kingdom. You have a job, a place to live, and you already know your closest RCCG branch.

You probably wouldn’t have made it this far without your family. Their love and support made you who you are today – now, it’s time to return the favour.

Every month, you manage to save some money. As you now know, several hundred quid doesn’t go very far in Central London. However, in a country where a N50,000 salary is common, sending as little as £200 home can make a significant difference.

In today’s blog, I’ll teach you the ins and outs of international money transfer – from the other end of the equation.

International Money Transfer 101: Avoid The Banks


If you’ve already sent money home, you may be scolding us. Money transfer is simple, you say. You go to the bank or Western Union agent, fill out a form, hand over the money, and it’s done.

There’s just one problem with that line of thinking – how do you know you’re getting a good deal? Are you merely taking these institutions at their word? If you are, you might want to sit down for a second.

Long story short – you’re getting scammed. Banks and Western Union agents count on their customers not asking questions. Because of this, they charge hefty fees and extortionate exchange rates.

Allow us to show you what we mean. For the sake of argument, let’s assume you have a bank account with Lloyd’s. To transfer £300 to your parents in Nigeria, they first charge a fee of £21 for in-branch transfer. Then, they give you a GBP/NGN rate of 432.327. On the other end, your folks would receive  ₦120,619.

Two and a half times the average Nigerian salary – not bad, right? But, what if you were able to move money at the interbank rate, or the REAL rate of exchange? If you had access to the same rate bankers do, you would get a GBP/NGN rate of 455.181. Changing £300 (without fees) at that price would give your parents  ₦136,544 – almost  ₦16,000 more!

In other words, you’re giving up £55 in fees and margins on a transfer of £300 – outrageous! Fortunately, there are much better deals out there – and they’re 100% legit.

Online Money Transfer Firms Offer The Best Deals


For decades, the monopoly that banks, Western Union, and Moneygram held over money transfers went unchallenged. During this time, they charged fees and margins as high as the market would bear.

In the example we gave above, the margin between the interbank and Lloyd’s rate was 5%. For many remittance routes, the gap can be much worse than that. In some cases, you can end up paying 13.6% of your transfer in margins and fees.

These vast gulfs represent how greedy these institutions have gotten. Fortunately for us, though, it has proven to be an irresistible target for disruption.

In the 2010s, online money transfer firms have finally given Nigerian expats a cheaper alternative. These online brokers charge low/no fees, and exchange rates within a hair’s width of the interbank rate.

But how are they doing this? Well, unlike the banks, these firms don’t have hundreds of branches to maintain. Nor do they have thousands of employees to pay. These firms built most of their operation using internet infrastructure. As a result, they can use the savings (and the bank’s fat profit margins) to charge lower rates.

Whilst risky, several firms now rank among the most significant money movers on the planet.

Transferwise: Easy To Use, Fast, Excellent Rates


The most famous of these companies was once just a clever arrangement between friends. Back in 2010, two Estonian expats living in London had a common beef. One had a mortgage to pay back home. The other had to transfer their paycheque from Estonia to the UK.

Transferring money to/from the two nations was costing both hundreds of GBP every month. Then, they had a Eureka moment. Why not check the interbank rate, give each other money, and reimburse each other accordingly?

They implemented the change, and it worked like a charm. Shortly after that, though, the entrepreneur within them asked, “How many others were in the same predicament they were?”

As it turned out, quite a few. Tavvet Hinrikus and Kristo Kaarmann launched Transferwise in January 2011. In their first year in business, they moved more than 10 million EUR. Unlike other money transfer firms, they moved cash at the interbank rate. To make money, they charged a small fee on the transaction amount.

As a result, they often had the cheapest transfers in most of the currency pairings in which they operated. By the end of the decade, they were moving more than 4 billion GBP per month. Today, they are the world’s second-largest non-bank money transfer firm – only Western Union moves more cash.

However, as Nigerians, our options for money transfer are limited. Thanks to prolific “419 scammers,” many firms do not do business with our country. Thankfully, though, Transferwise supports NGN transfers.

How much can Transferwise save you? Let’s look at the numbers. When you move £300 to Nigeria, they start by charging a small transaction fee of 0.97%, which takes off £3. Then, they’ll change £297 at the GBP/NGN interbank rate of 455.181. Your parents would receive  ₦135,220 or about  ₦15,000 more than through your bank.

Over a year, they would get  ₦180,000 more. Think about it – that’s more than three average monthly salaries, in the difference between your bank and Transferwise!

A Little Money Can Make A Big Difference


Nigeria can be a tough place to make a living. In a few short years, you hope to have your family join you here in the UK. But, until then, your remittances help them live a more dignified life. By getting a better deal on transfers, you can make things even sweeter! 

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