A comparison of global fintech services

PayPal and Wise – the cross-currency issue

The fees associated with converting money between currencies are always a dilemma. Many services use their own exchange rate which are not aligned with the mid market exchange rate. Further, many lack clarity in relation to the fees you are charged for converting and sending money. In a world where we expect immediacy in our online activities, PayPal and Wise, formerly TransferWise, hold much of the market. This article details information on the capability of Wise and PayPal as regards international transactions with conversion fee calculations included.

PayPal in focus

PayPal is perhaps the best known online payment service operating worldwide. Yet from experience, the exchange rate PayPal use differs from the mid market rate. However, when considering the commission on balance conversions (4-5%) and cross currency payments (2.5-3%), you will likely deem PayPal less economical. Likewise, these hidden fees can be difficult to spot in the payment summary provided. When you receive a lower balance than on your currency converter, you question where your money was taken.

The Online Teacher Example

Take the example of an online teacher paid in Chinese Yuan Renminibi (RMB). Your earnings firstly have to be converted from RMB to USD, as RMB cannot leave China. Secondly, your money needs converting into your own currency if you are not from the U.S. I will take you through a scenario an online teacher may encounter:

• You want to work 8 hours p/w at $18 per hour which would = $576 per month.
• Minus 5% = $28.80 (at this stage it looks a small deduction).
• Yet you decide to increase your work to 19 hours p/w which would = $1368 per month.
• Minus 5% = $68.40 (more than I would pay by bank transfer).
• Note, you are also subject to any fees charged by your own bank.

PayPal verdict

We can conclude that PayPal is more profitable for those who don’t plan to work large quantities of hours. A bank transfer deducts set fees so if PayPal offer lower deductions then they can be of value. A further consideration is the speed of their exchange process. PayPal payments take 3-5 day business days to complete, as do international bank transfers. I use PayPal exclusively for payments of same currency as they are a recognised provider on most sites. However, for currency exchange and receiving online income, I use Wise, as more value can be added. See more: Wise – the smart route for cross-currency savings.

Wise in focus – a viable solution

Meanwhile, Wise has become beneficial for receiving and converting income in multiple currencies. Certainly, their conversion rates are equivalent to the mid market and are transparent. As a result, Wise has become my main bank now that I work remotely and receive income in different currencies. Their favourable commission, between 0.35% and 1% for all transactions provides an increase in earnings. When we compare Wise to PayPal in cross-currency exchange, the evidence shows Wise is where the value is.

Converting and sending between balances you ‘hold’

When you add a currency to your account it becomes one of your balances. PayPal have a similar system where you can hold balances and add money to them from a bank account. With Wise I hold AUD, GBP, USD and THB meaning I can convert and send between balances, and add money. Wise facilitates over 50 currencies in this holding balances and converting, sending and adding to them, these are all instant processes. In addition, you can make payments and convert currency in 80 currencies. Cross-currency conversions are almost always completed within a 24-hour period. This is a factor that they have improved significantly within the recent times.

Receiving Income

Wise provide you with your own bank details so you can receive money from friends and businesses. In my case, I have individual bank details for AUD, GBP and USD. Currently, users are able to instantly receive payments in AUD, NZD, EUR, GBP, SGP and USD to their Wise account. There are no hidden fees in any of the above transactions which is a major benefit with Wise.

Useful Links

If you decide to open an account and sign up using the link here you receive a first transaction free (see above). By clicking on this you’ll see useful information about conversion rates and how Wise compare to PayPal and other competitors. Additionally, I’ve included a Price Change Checker to clearly see the fees for each type of transaction. Note, this article includes Wise affiliate links and if you register through one of these, I would earn a small commission.