Hurlabrick

I used Transferwise to transfer £GBP errr.... lots..... (£100k plus). Maybe I just got lucky that they didn't steal it - arrived 2 days later. I have no hesitation in using them for large sums and will do so again when the UK house sale goes through.

graham1710

Yep, I'm quite sure that the likelihood is that no one would have any issues with transferwise. I was just passing on concerns that some people have using them compared to one of the more established firms (that being said, as per MSE, they still aren't without risk either).

Chances are whoever you use (as long as they're reputable!), you won't have an issue, but it's just worth doing the research on who you're comfortable going with, particularly when it's a large sum of money.

BristolUK

Yes, that's what people have said. But even from before the likes of transferwise came along, nobody (as far as I've seen) has ever said what rate they got, what the fees were or done the overall comparison. It's like it's a big secret.

It seems to me that the bigger companies were once so much better than the banks and those that used them may continue to believe they are the best option when they may not be. I mean, they have to make money don't they so for every person that does get a good deal from them compared to currencyfair or transferwise there may be three who did worse.

Until someone actually says what the receiving account received at what cost in ££, a comparison site is the best guide.

graham1710

No secret. None of the 3 listed on the MSE link for larger amounts charged me a fee. They just gave a rate, and they made their money in the difference between the rate they gave me and the mid-market rate at that time that they presumably bought at. Obviously the rate they gave me then isn't relevant now as the market rate won't be what it was then. But for comparison sake, I got within approx 0.005 of the mid-market rate. e.g. if mid-market rate at the time was 1.7800, I would have got 1.7750. That was the bottom line, no fees, etc. When negotiating for a rate, it really depends on a lot of factors, such as current mid-market rate and importantly how the market is trending, and general volatility. If it is trending downward, or it's volatile (e.g. a lot of uncertainty as a Brexit announcement is coming up soon), the spread will be bigger and you won't get as good a rate. But if everything is fairly stable, you'll get much closer to the mid-market rate.


Hope that helps!

DigitalGhost

Tbh, the biggest concern for me is whether or not you can fully intiate the process remotely from Canada. I don't have a proper Canadian bank account any more and so would need to open one with someone like Scotiabank or BMO before I could start the transferring funds to it from my UK account.

The last time I did this was in the opposite direction and I was in Canada at the time so going into a branch to do the transfer from Canada to the UK was no problem.

Grathen

Thanks for the excellent informative replies everyone!

BristolUK

Thanks, that's more than I've ever seen anyone say before, but it still reads a bit loosely if you don't mind me saying. You said it was close to mid market rates, but what are mid market rates, halfway between selling/buying rates? See, I find it a bit puzzling because I saw on the MSE articles that Transferwise were mid market. Before I ever used them I did much research and never saw anyone at all quote a rate as favourable as them for ££ to $CAD. I find it hard to think of the best I saw in all my research as middling.

Possibly, because TW does things differently according to currency/countries involved, mid-market is a safe description? Perhaps sometimes it's better for some currencies and much worse for others and 'mid' covers both eventualities.

Of course, just as I think some people who transferred with their method of choice because it was the best at the time stick with it, even though it may not be the best now, TW was far and away the best when I used them the first time for the amounts I do and they may not be now. CurrencyFair certainly looks much closer than back then.

On the point of security - " I found people tended to shy away from transferwise for very large amounts, citing concerns of reliability/safety" - that MSE article differentiates between Authorised - "Each day, at the close of business, these firms separate your money from the firm's own accounts (known as ringfencing). This protects your cash, so you should get it back if the firm gets into difficulty" and Registered - there are no safeguards for your cash. This means there's no safety process if something goes wrong with the firm, meaning your money isn't protected.
And the MSE article states "Transferwise is authorised by the Financial Conduct Authority (FCA). This means any money you send using the service is kept separate from company accounts."

Sounds safe then.

DigitalGhost

I'm guessing that it's safe to the point that they're an authorised institution so the UK government will cover any money that you trust to TW up to 85 grand. Above that amount you normally need to take additional steps to protect yourself against company failure or fraud.

That's a hell of a lot of money to send abroad in one transaction at any rate though.

graham1710

Sorry for the delayed reply. Had to go to the airport to pick up relatives coming to visit. The life of an expat :-)

Mid-market isn't a loose or arbitrary term at all, it is also known as the interbank rate and is considered the true rate for the currency pair. This link explains it reasonably well: https://www.xe.com/faq/rates_buyorsellrates.php. I'm sure there's also plenty of other links out there that explain it. Just make sure you search for explanations on FX mid-market, as it doesn't necessarily mean the same in other types of trading.

You can find this rate on FX trackers, google, etc. As they say, it's the midpoint between what the markets are buying and selling at and is therefore considered the 'real' rate for that currency pair. When you're trying to get a rate, either buying or selling, your goal is to get as close to that rate as possible. In the case of GBP:CAD, it is around 1.7243 at the time I wrote this. It's obviously changing all the time as people are constantly trading across various continents. I think it stops over the weekend as I think FX markets close, but I forget! So if you were buying CAD, then you're going to get something below that. If you're buying GBP, you're going to get something above that. The spread is how currency traders make their money.


So when getting a quote on a rate, I will ultimately compare it to the official mid-market rate at the time. Like I said, google will show this or for a real-time update, I've used https://www.dailyfx.com/gbp-cad. You can drive yourself mad watching that constantly move if you're trying to wait for a decent rate! The closer I get to that, the better the rate I'm getting. Any of the big currency companies will go into the market at the time you want to buy, and see what price they can get there and then on buying. In the case of the ones I mentioned, they'll then shave a little off that and give you a slightly worse rate, and that's where they make their money. These companies actually take the money and buy the other currency with it, and then move it over. As I said, calling them is typically going to get you the best rate, and you're going to get a better rate the more money you move. They can also do things like place limits, i.e. when the market hits X, buy. So then you don't need to call back up when you want to buy. You can negotiate the spread with them at the time. i.e. I want my actual buy rate to hit 1.7850 but as the market is currently positive, the spread between that and the true mid-market shouldn't be more than 0.005, etc. That sort of thing.

I believe (but haven't really researched in great detail) Transferwise have reserves in various countries and don't necessarily buy the currency. They match up people in different countries wanting to buy/sell that pair, and then they facilitate the transfer. So if you have GBP and someone else has CAD and you both want the opposite, your GBP will essentially pay into their GBP account and their CAD will essentially pay into your CAD account. Now whether it's actually your money, or some reserves transferwise have, I can't say. But that's how they claim to give a better rate, because they're not exposed to the same spread that you'll get actually buying/selling on the markets. I'm not sure if they offer true mid-market or not, but they're usually a lot closer but then charge fees some of the bigger ones don't. You'd have to ultimately compare where the biggest bang for your buck is and who you're the most comfortable with.


Anyway, I hope this explanation helped some more. Mid-market is the true reflection of the value of the currency because it is essentially the midpoint between what the markets are currently buying and selling at. It's a public number, not one that is just made up or arbitrary. You can track it, watch it live, etc. That's what you should use to determine whether they've given you a fair rate, or whether you think you can do better. The exact spread you'll get will be totally dependent on loads of factors, like I mentioned in a previous reply. So you can't say you'll always get a small spread, etc.

At the end of the day, you just need to make a decision based on the actual return you're getting and who you feel most comfortable with. I've used the big players and I've used transferwise, and had good experiences with all of them. For large sums of money, I personally chose to use the big players. I managed to negotiate a great rate, I got good cashback from MSE and I felt most comfortable with them. I think I would have got a little more CAD from transferwise, but it wasn't actually a lot as I'd negotiated a good rate and I had better peace of mind with the others for moving such a large sum of money. I wouldn't hesitate to use them, or transferwise, again.

Let me know if there's anything more I can do to help out with explaining how it all works.

Graham.

BristolUK

Cheers...that's kind of what I was getting at though. Mid rate, between buying and selling. I always sum that up as whatever way around you want to do - £ to $ or $ to £, you get the worst rate.

An analogy is when on holiday and you want to change some currency.

When you see a board at an exchange place saying £1 = $1.65 or $1.70, you're going to get $1.65 for your £1 but the other way around £1 will cost you $1.70.
Now, if you're looking to get the most $$ for your ££, you check the boards at the exchange places looking to see if you can get $1.71 instead of $1.69 (mindful of any fees that cancel out a gain)

And mid market would be around $1.675. What I'm quibbling with was that reference to Transferwise being mid market rate because the rate you will get from them is like going around the exchange shops and seeing $1.71. That's a higher return than the others, not a mid one.

I accept that in private (because one might get favourable terms for the quantity, or regularity of use) it might be possible to get $1.72 from another source, but that doesn't make the 1.71 mid rate.

graham1710

Sure, you're always going to get lower when buying and higher when selling on the markets. The markets don't actually trade at the mid-market rate, or no currency trader would make any money and that's what they're ultimately out to do! If two people just wanted to be fair and it really was about just swapping money and not trying to make any profits, they'd use the mid-market rate. It's also the interbank rate, meaning banks can and do trade with each other at that rate. But the mid-market rate is the true benchmark of the value of that currency pair and is something you can track. The firm that gets closest to that is what is going to get you the best bang for your buck (bearing in mind fees, of course). If you just wanted to trade with your friend (let's say I have CAD and you have GBP and we want to trade), we would trade using the mid-market rate as that is the true value of the currency pair. That would give us both a fair deal as it is mid-market. But if you're going with a firm, they need to make money. So they either use the mid-market and charge you fees for their service, or they give you a rate that isn't as good as mid-market (above or below, depending which way you're going) and make their money that way.

So moneycorp, etc. make their money by using a rate that is worse than the mid-market rate, which is much like the currency exchange places that you mentioned in airport, etc.. Transferwise say they use the mid-market rate (i.e. what can be tracked on any FX tracking website), but they make their money be charging you fees. I can't guarantee if transferwise do use the official mid-market rate as I'm not tracking them, but their business model is to charge fees for the service but give you the real mid-market rate. So unless they are falsely marketing, then they do give you the true rate of the pair (i.e. it should be the same for buying or selling), but they just charge you fees instead. For example, if I go to them just now, their rate for GBP:CAD is 1.70965. The other direction is 0.58495. So if you take £1000 and change that into CAD (ignoring any fees), that gets you $1,709.65. If you then change that amount back using 0.58495, you get £1,000.06. You can ignore the extra £0.06 as that's just because the market moved between me getting the two quotes. It'd be much different if they were using a spread like moneycorp. If I was able to do them at the exact same time (which is basically impossible as it moves constantly as trades happen on the market), then I'd get back my exact £1000. That rate was basically the same as what the live tracker said at the time. It was marginally off, but that's going to be down to their systems not being able to update their rates immediately as it moves as it's moving every second at least. But the point still remains, they are charging the same rate for buying and selling, which is the very definition of using mid-market and the true/real rate. If I did that with moneycorp, I'd get two different rates and I wouldn't get my full £1000 back on the rate alone. But transferwise make their money by charging you a fee based on the size of transfer you're making.



So it is true to say that Transferwise use mid-market, as they are ultimately using the same rate for both buying and selling. If they didn't charge any fees, you would get back the exact same amount of money in both directions. But they then charge you fees on top to make their profits. Moneycorp, etc. use the model of building their fees into the rates and give you a worse rate for both directions (like the airport FX places), but then charge you no fees. If you found someone that, like you, just wants to swap money, then you would use the mid-market rate and not charge any fees because that is the true rate.

It's just two different business models and you just need to find which works best for you financially and in terms of peace of mind. But what they are saying is correct.

BristolUK

Ah ha...I see what you're getting at now. Going on holiday one sees the rate you get for your £ and then when you come back, if you have any currency left, you change it back at the other rate. You see the difference in both directions but I've only ever transferred in one direction with Transferwise so not noticed.

graham1710

Exactly :-) Although with the traditional route you mentioned above (i.e. change when you leave, change back when you come back), you could at times get lucky and have the market move in the direction you want while you're away and actually get a better rate coming back then you would have got if you'd changed money that direction before you left. You'd have to be pretty lucky for a big enough swing (based on what the spread the airport places use), or go away for long enough for it to move enough. Alternatively it could move in the wrong direction for you and you get even more screwed, haha.


Yep, the FX places at the airport (and M&S, etc.) have always used the model of charging you a worse off rate than the mid-market and making their money that way (some may have also charged fees!!!). I guess they figured that was an easier sell than charging the mid-market and adding fees on top (like transferwise). I guess people, particularly in the days before everything was at your fingertips on smartphones, didn't know what the true mid-market was so their easiest comparison was to walk around and see who gave the best rate. Transferwise have obviously adopted the other business model and preach about how it is fairer to charge the mid-market (it absolutely is, if there were no fees, haha), but then make their money with fees. To be fair, their fees are very well outlined so you don't get misled.

All it boils down to is comparing who will give you the most amount of currency on the other side when everything is transferred, and who you are most comfortable with. All of them seem reputable and have various safeguards for before your money is transferred (i.e. I believe the riskiest part is after it has left the sending bank, rather than while it is sitting there ring-fenced before being transferred), so it's just up to you at the end of the day based on financials and what your gut or research tells you about who is the safest.

Oh and remember some banks charge fees for incoming wire transfers!! Everyone wants a piece of the pie... Depends which company is doing it, whether it shows up as an international wire or something else. My bank in Canada (TD) did charge an incoming international wire transfer fee, but I got them to waive it.

Hurlabrick

So the question might be 'So how come Transferwise use mid-market rates and other FOREX companies give you a rate significantly lower?'

It is important to realise that Transferwise are not a 'true' FOREX company in the traditional sense of the word.

A 'true' FOREX company (like the banks it HiFX etc.) take YOUR money in GBP and convert it to CAD in the foreign exchange markets, then send the money electronically through to your designated Canadian bank. The FOREX company use their own rate, which is usually worse then the FOREX 'buy' rate, and they will often charge a fee. You bank may also charge a further fee on top.

Transferwise is more of a 'virtual' operation. They take your money in GBP and hold it in their GBP bank account. They then take CAD from other people wanting to changed CAD into GBP (or whatever) and hold it in their Canadian bank account. They then 'match' 'your' GBP with someone elses CAD. They then pay CAD into your Canadian bank account from their own Canadian account - so in reality, money never actually changes through the money markets. It is as though you had a very trusted friend who wanted to change say CAD into GBP and you wanted to change GBP into CAD - you get together, agree a fair rate of exchange then you pay your GBP into their account, while they pay CAD into your account. AIUI it is much the same way the Knights Templars made their money with pilgrims - and doubtless goes back earlier than that, just updated a little for the internet age!

Sure, Transferwise are not now the only outfit that operate this 'virtual' model, but I believe that they were the first and are now pretty long established with a good track record.

graham1710

Yep, this is a great explanation of how they work and differ in a technical sense. I alluded to it in an earlier post, but wasn't 100% clear on the Transferwise details to concretely say it.

You just need to compare the final amount of currency you get, and who you're comfortable using for larger sums of money :-)