Thursday, 10 April 2008

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, 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.


Rob In Madrid said...

Weird, your RSS feed shows two articles about moving money around the world but when I click on the first article it shows the posting doesn't exist.

Anyways excellent and well researched article. What I find odd is opening a bank account is pretty much painless. But getting an account with an FX dealer is a hassle. I've opened bank accounts is 3 counties (Canada Germany and Spain) and all have been pretty painless. As far as I remember only Spain insisted on ID such as passport. Spain also resident and non resident accounts which makes sense as it has 100s of holiday homes.

But opening up a FX account was a hassle. If I remember correctly the problem was verifying the account.

After I read your column I did a quick trade quote to see the difference, and it worked out to about $1.40 on a 100€ wired to Canada. The fee was 11€ as well.

Generally speaking for the odd money transfer go to a bank. For regular transfers go through the hassle of setting up an FX account. Also with a bank I can wire money to anyone but not with an FX account. Only to accounts that I've set up.

Which brings up a question, If I'm sending money to my bank account in Canada from Europe why do I need to verify my Canadian account.

BTW I use and they are very good at responding to email enquires.

CanadianInvestor said...

Hello Rob,
Re all the posts that disappeared, there were three actually ... somehow the html got too complicated when I cut and pasted from OpenOffice and the blog format was all messed up, so I deleted them and started over today. The post was very long anyway, so I've chopped it up.

Opening a bank account today is subject to the same anti-money laundering regulations so it should be the same hassle as for an account with FX dealer. It certainly was when I opened up an account with LloydsTSB last September. Some countries or some financial institutions may apply the FATF international recommendations more or less rigourously. One of the next posts will describe the sign-up process.

Looking ahead to the next posts, I found that for large amounts of money, even if a one-time transfer, using an FX dealer can save a lot compared to a bank.

The destination account registration seems to me to be only doing in advance what a bank wire transfer would require anyway at the time of making the request at the bank - they need to know exactly where to deliver the funds, account number, branch etc. The first time I went to the banks to set up a wire, it was a comedy of misunderstanding, where the Canadian bank personel was insisting on SWIFT/BIC codes for accounts and the UK bank wanted IBAN info, which is used in Europe. Arrgg! Poorly informed bank staff, which is pretty well run of the mill in the branches, can make a simple transfer an exercise in frustration.

Yes, I found the FX dealers uniformly very good at customer service, also to be discussed in the next posts.

And finally, I signed up with CustomHouse, which underlies, so one of the next posts will compare live quotes from them, another FX dealer and a Canadian bank. Need less to say, the quotes are all different. I'm also gonna provide the list of all the FX dealers I found - there is a quite a good choice.

rob in madrid said...

I've heard opening a bank account in the UK is a real nightmare. In Germany and Spain it was quite straight forward.

Anonymous said...

The real issue is security of funds.

In Australia and I think the US the FX dealer is regulated.

In Canada, UK they are not and you can lose money if they go under.

I would prefer to deal with a bank and BMO came in about right for exchange , even if you might make a bit more with etc.

In the UK there was a big scam with a money tranfer service (which mysteriously lost the clients money over 4 months). There are so many scams out there.

In Canada, a couply osot there life saving from the UK handing it over to a fx dealer...

So be very very careful.

CanadianInvestor said...

Anon, You touch on a critical point. Safety of money is essential. I talk about this in yesterday's post.

Apart from regulation, which applies in all of the UK, Canada, the USA and Australia, there are two additonal protections to look for and which many FX dealers seem to provide - 1) holding each client's money in segregated bank accounts in trust for the client, meaning the FX dealer and its creditors, should the FX dealer get into financial trouble or go under as a business, cannot use it or get at it for any purpose other than giving it back or sending it on per your instructions; 2) having liability insurance for cases of fraud/theft by the FX dealer's staff.

So far as I am aware - and please tell me if you know otherwise, no country provides reimbursement of client money like deposit protection on bank accounts (though the bank account deposit insurance may kick in for funds that are in segregated accounts in the case of the bank's failure) for cases where the FX dealer goes under.

My impression is that there is more danger with the money transfer services dealing in small amounts, though they are supposed to be registered and regulated. In the UK, the Financial Services Authority is the regulator for them and the FX dealers too. If the standard notice re being authorised and regulated by the FSA is not there in plain view on their website or on printed literature or on signs in the storefront, then it is a big warning sign not to do business with them.

Anonymous said...


Sorry about the typos last time, but just to confirm

In Canada I do not think they are regulated, I live in Canada and the whole thing gave me the creeps to convert a large GBP amount. So I went with BMO...even if they cost more. hey gave me just less thent hr mid market rate on xe. com so I was happy. Maybe another place could give more but is it worth the risk?? Maybe converting small amounts say in 10K chunks is a way to go to reduce still get a good rate..

Mayb in the UK they are now under the FSA but its not clear..

CanadianInvestor said...

I beilieve you are right that in Canada the FX dealers are not specially regulated with respect to dealing with customers fairly, disclosure, complaint procedures, the kind of consumer protection regulation that I suspect you are after. In Canada the only regulation seems to be the anti-terrorism and money laundering regulation. General consumer protection laws that apply to all businesses would of course apply to FX dealers as well.

In many other countries, there is such a consumer protection regulator - see this list on the CustomHouse website -
which probably influences the whole company to behave better. It would surprise me greatly that a particular company would be honourable and fair in all the countries where it is regulated and then be ripping people off in Canada only. Canadians benefit from other countries' regulation.

I asked one company which countiry's regulations apply on an international transfer and they said it is the country where you start a transfer e.g. for a move of CAD to GBP (UK), the regulation would be Canadian.

Anonymous said...

Being regulated to my mind means having audited accounts and procedures and being accountable to govt authorities. Otherwise its a free for all.. and insured...for deposits.

If all I ahve to go by is a web page and some 'storefront' perhaps it all seems a bit creepy.

Anonymous said...

Try "Dr. Fraud' First Solution Money Transfer. A huge scam...

Remitter said...

Most remitters avail the services of online money transfer companies. But if you look at the scenario in Mexico then you would find that the traditional and illegal practices still exist in the country. The Filipinos according to me have been trend setters in adopting a far more technologically sound and simpler money transfer medium.

CanadianInvestor said...

Remitter, that's intriguing. What are the Filipinos doing?

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