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TransferWise Brings Multi-Country Banking to the U.S.

Adam Morgan

Adam Morgan

Contributor

4 min. read

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Spending money abroad is almost always more expensive than spending money at home. Even if you’re armed with a great travel rewards card, currency exchange and bank fees add an extra “travel tax” on top of every purchase. But today, U.K.-based fintech startup TransferWise is launching a new debit card in the U.S. with lower fees than traditional banks and a “multi-currency account.”

The TransferWise debit Mastercard works like this: you sign up for a free card, load it up with cash via the TransferWise web or mobile app, where you can convert your American dollars to whatever currency you’ll need abroad. When you arrive at your destination, the debit card acts like a local bank account, including unique account and routing numbers in Europe and a few other countries — no “travel taxes” required.

“TransferWise is working to remove some of the financial barriers keeping people from traveling, living, and working across borders,” Taavet Hinrikus, CEO and co-founder of TransferWise, said in a release this morning. “Banks have gotten away with charging people extortionate fees to access their money overseas. Traditional multi-currency accounts are inaccessible due to minimum balance requirements of $100,000 or more. For the first time, we’re bringing true multi-country banking to anyone in the U.S. who needs it.”

That’s a bold claim, and to be clear, TransferWise still charges a variable fee every time you convert money to a different currency (as well as every time you deposit money into your account). But unlike some banks and credit card companies, TransferWise shows you the exact cost of every conversion before you click “confirm” — and across the board, its exchange fees are indeed cheaper. Plus, there are no monthly maintenance fees or minimum account balances.

Here’s what the TransferWise web app looks like in action, with two foreign currencies activated (it takes about three seconds to add a new currency):

TransferWise online banking

The company was founded in 2011 by two Estonians living and working in London, Kristo Käärmann and Taavet Hinrikus. “Every month they moved their money the old way — which wasted their time and money,” TransferWise claims, so they developed a cheaper way to send money (and pay contractors) between countries — an international Venmo, if you will. Last year, it launched its first debit card in Europe, and now TransferWise acts as both a mobile payment system for sending and spending money and a de facto online bank for frequent travelers.

Prior to the launch of its American debit card, Reviews.com tested a preview version of TransferWise’s debit card app. We were impressed with the simplicity, design, and transparency. The coolest thing about the multi-currency account is that it’s smart enough to handle unplanned spending. Let’s say you’re in France, but make an impromptu day trip to the U.K. and forget to convert your euros to pounds ahead of time. TransferWise will instantaneously compare currency exchange rates for any currencies you do hold on the card, then automatically make the cheapest conversion possible and allow your transaction to proceed seamlessly.

TransferWise’s new debit card comes on the heels of Facebook’s announcement last week that it would launch a digital wallet in 2020, Calibra. Like TransferWise, Facebook claims one of its primary goals with Calibra (and its accompanying cryptocurrency, Libra) is to make it more affordable to spend and send money abroad. “Moving money around globally should be as easy and cost-effective as — and even more safe and secure than — sending a text message or sharing a photo, no matter where you live, what you do, or how much you earn,” Facebook says in its Libra white paper.

“At this stage, Libra is still more of a theoretical concept,” Josh Aziz, Head of Product at TransferWise North America, told Reviews.com in an email. “The white paper didn’t go into detail on how they will lower the cost of international money transfer through blockchain. My assumption is that those details are still being figured out. TransferWise, on the other hand, is already anywhere from 3-12x cheaper than traditional providers, depending on the market. The World Bank estimates that the average fee for remittances is 7%, where TransferWise’s average fee is 0.65%. We have already made great strides in doing what Facebook has set out to achieve.”

“In addition,” Aziz said, “we see Libra not as a threat, but an opportunity. If people need Libra, who is best positioned to change USD>Libra or EUR>Libra? If anything, this helps our mission of fast and cheap. And there will never be a single currency in the world.”

It remains to be seen whether Facebook’s fees will be higher or lower than TransferWise’s, or how Calibra will handle currency exchanges when users want to convert their libras to cash. But judging from TransferWise’s clean, clear app, Facebook could learn a thing or two about transparency from Käärmann and Hinrikus.

Photo/illustration by Hunter Newton for Reviews.com.

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