Moving Money Around the World: Options - Cash Kiosks, Remittance Senders, FX Dealers, Banks

People who are on the move around the globe to work, to live, to study, to travel, to retire or to invest almost always need to move money from country to country as well. And they need to do it cheaply, quickly, securely and legally (of course).

I am one of those people, a Canadian who spends a lot of time in the UK with a need to convert cash from Canadian dollars (symbol CAD) to UK pound sterling (GBP). So, I asked myself, what are the alternatives to heading down to my bank branch and asking for the standard Wire (also called a telegraphic) transfer? Are there services available and how do they compare as to speed of transfer, security, telephone and Internet accessibility, hours of operation, customer service, flexibility and cost?

There appear to be four fairly distinct segments for international foreign exchange and transfers -

1) Vacation/Short-term Travel Cash - bank notes and coin exchange that are obtainable in kiosks at airports, hotels, banks and downtown tourist or business areas.

2) Remittance Providers aka Sending Money Home - primarily for migrant workers sending money from more prosperous countries to their homeland, mostly in small amounts (max about $2000). Companies in this space often have vast distribution networks of their own or agents to provide storefront face-to-face service. Some are global companies like Western Union, others are regional. Some are regulated but many are informal and operate within ethnic or national communities.

There is a very handy portal called SendMoneyHome.org, a non-profit UK government sponsored comparison site that shows which money transfer companies offer services and at what price between different countries. The website is an international development effort whose aim is to foster more transparent and cheaper transfers, i.e. so that more money will end up in the pockets of the recipients instead of the money transfer companies, like Western Union, MoneyGram, MoneyBookers, Tranzfers and many others, including even PayPal. In exchange for ubiquity, speed, simplicity, convenience and handling of virtually every currency, the costs are high, often amounting to 5% of the principal.

3) Foreign Exchange (FX) Dealers - these companies deal with larger amounts of money, from about $2000 upwards. The funds transferred may be for any number of purposes: the purchase of foreign property or big ticket items like boats, cars and antiques; relocation abroad or emigration; repatriation of salary from a foreign assignment; funding overseas studies, pension transfers and the like. Rarely is cash involved and most dealers won't even accept cash, unlike the Remittance category. Transfers are usually bank account to bank account, which can be a very good thing if the conduit is sure. The FX dealers' selling point against their main competition, the banks of the world, are fast, easy transfers with a lot more customer service and less cost.

Not to be confused with the FX dealers and the process of moving money are the many foreign currency trading websites and services, which are concerned with trading currencies for speculation and investment risk management.

4) Banks - Every bank in the world provides Wire transfer services as the basic method of moving cash. Secure and reliable, Wire transfers pass through the vast SWIFT network for moving funds from country to country. Banks also provide travel cash notes and coins in more or less any currency desired, even as I discovered recently, Scottish notes, instead of English notes, though both are GBP.

Some banks like HSBC have an international focus or international arm, like LloydsTSB, with accounts in multiple currencies, such as USD, EUR and GBP. Moving funds from one currency to another is easily done online or over the phone. Geared towards high cash flow and high net worth clients, there are fees accordingly (e.g. see LloydsTSB's fees for its international account). Ancillary services like tax and investment advice are typically available.

That's the lay of the land, the basic options available to move funds around. Over the next several post installments, I'll look more closely at the FX dealer option to see how it works in more detail and what the advantages and disadvantages are.