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Fintech Review: Is Wise Safe for Moving Money Overseas?

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Wise, the FinTech company formerly known as TransferWise, is disrupting the international currency exchange market. 

It sends money all over the world in other currencies for much lower fees than most banks. Not only that, but it also offers services to hold money in different currencies both for personal and business needs.

Admittedly, our opinion of Wise is based on the needs of the people we work with, including 7- and 8-figure entrepreneurs and high-net-worth individuals. That’s why this Wise review will be unique from others you may have seen. 

Wise has both pros and cons. As such, we will discuss its rates and its multi-currency accounts and balances. You’ll hear the views of Nomad Capitalist Founder Andrew Henderson on the best option for your particular situation, as well as where the service falls short. 

Nomad Capitalist is a turnkey solution for offshore tax planning, dual citizenship, asset protection, and global diversification. Find out more here

Wise Rates are Hard to Beat

While we’re not huge fans of most FinTechs, we have to confess that we do have a pretty good opinion of Wise. 

Let’s start this Wise review with the rates. The FinTech’s main function is sending money. That’s what it is known for, especially international transfers.

If you have any experience moving money overseas, you know that banks regularly rip you off with their fees for transfers and currency exchanges. That’s where Wise comes in.

Wise was started by a couple of people frustrated with constantly needing different currencies but always coming face-to-face with banks’ terrible exchange rates and high exchange fees. 

They realized they could avoid those high fees by having a peer-to-peer matching system that could match people desiring opposite currencies. 

The way Wise works, the money never actually leaves the country of currency. For example, one customer wanting to make an exchange from USD to GPD will deposit their money from their US account into the Wise account that is also located in the US. 

Once that occurs, Wise then provides the equivalent amount of GBP from its account in the UK to the customer’s account in the UK. The money itself never crosses borders, but the exchange occurs anyway. All for a much lower cost. 

By having accounts in many countries and in over 50 of the major currencies, they are able to cut out high bank exchange fees for their customers.

It’s a great system and their rates are pretty good. It’s especially beneficial for smaller payments which you can generally debit from your bank account. You don’t even have to go through the hassle of wires that you do for larger payments. It’s pretty efficient. 

The Euro rate, for example, is much better than any U.S. bank that we’ve seen. Wise can even beat the rate of banks that we have good relationships with. If you’re sending money in those widely used currencies, it’s pretty good.

Now, If you have a private bank or a priority bank, you may be able to beat Wise’s rates for some main currencies. We have a bank in Asia that can beat Wise whenever we want to transfer U.S. dollars into Euros, Swiss Francs, or Singapore dollars. They cut the spread by about 50%. 

If you have that kind of relationship with your bank, especially for large currencies, that may be better than Wise. 

We have often said that the best way to transfer money internationally is to have a bank that you trust handling the transaction on both ends. It’s worth it because it’s faster, it’s easier, and it happens without adding on the layer of dealing with peer-to-peer money transfer services.

For example, if you have half a million to millions of dollars to put in an offshore bank and you have a relationship with a bank there, then it’s possible that they can get you better rates on whatever currencies that they deal with — generally for just the standard currencies.

Where Wise does very well is when you are transferring money into more exotic currencies. If you want to put money into the Georgian lari and you need to send money in Croatian Kuna, you might run into some holdups and major fees at a bank. Those are currencies that aren’t widely offered. 

So, if you’re doing deals in different places around the world and you want to hold some of those currencies, or if you have employees to regularly pay in some of those countries, Wise may be the way to go for you. 

It may be easier than setting up a local bank account and sending money from your home account to convert it there. Just keep it simple and pay Wise’s greatly reduced fees.

Wise Balances and Multi-Currency Accounts

One of the services that Wise also provides is balances. You can actually open a balance in a number of different currencies and store money in those accounts on both a business and personal level. 

For Nomad Capitalist investors, this could be useful if you’re looking to buy a property in a particular place. 

Let’s say you want to buy a property in another country. If you don’t have a residence permit there and you don’t own the property yet, then you really have no basis for opening a bank account there. 

As Nomad Capitalist Founder Andrew Henderson explains: 

‘’I went through this the first time I purchased a property in Malaysia. When I signed the contract, the rate was almost at a record low. By the time I had started making payments, the ringgit was coming back up. 

”It would have been nice to have had a balance account with Wise with the ringgit already exchanged and not have to deal with changing exchange rates.

‘’When I did my most recent transaction in Malaysia, I had bank accounts in Asia so I was able to use Wise’s convenient exchange rate. 

‘’I’m not extremely obsessed with exchange rates, but during the pandemic, I would look for times when the rate was pretty bad against the U.S. dollar. If it was, I would convert or move money over to a needed currency and keep it staged and ready to go to pay for transactions from my bank account. 

‘’If you don’t have a local bank account, Wise allows you to store money in the local currency and have it ready to use,’’ Andrew says.

Is TransferWise Safe? A Concern About Balances

One concern with balances though is that you’re basically adding a layer of extra risk in between you and Wise. 

While you can store money in multi-currency accounts, the money stored in these balances is basically put into the banks that Wise uses with whatever deposit insurance they may offer. Wise does use some of the strongest banks, but if those banks go under, then there’s not a lot they can do about it. 

Your money is insured by the banks that Wise uses, not Wise itself.

As Andrew explains, ‘’So, to me, it’s kind of the same equation that I ran into with my real estate lawyer when buying a property in Malaysia: I told her that I didn’t want to be keeping tons of money in the bank so I wanted to get the transaction done and paid for. 

‘’She offered to keep the money in her escrow account, but I told her that doing so really didn’t solve my problem of having too much money in the bank. It just added another layer of complexity in which the money was out of my control because it would be in her account, not mine. 

‘’I feel the same way about Wise. With Wise balances, you can pull the money out whenever you want and direct it where it goes — which is different from an escrow account.

”But if you’re going to be doing deals in countries around the world, you may as well make the effort to open your own account in the country where you’re going to do business,’’ Andrew concludes. 

A More Sophisticated Financial Plan

Let’s say you’re going to buy a property in Turkey for citizenship by investment. Obviously, it’s a country where you want to be very careful what exchange rate you’re getting into since the currency is somewhat volatile.

You could just go to Turkey, or potentially remotely, get a tax ID number, open a bank account, and move the money in just using Wise as a transfer mechanism from your base currency into your own account in Turkish lira. 

However, if you have a more sophisticated financial plan that includes more than one or two banks, you can get multi-currency bank accounts around the world.

If you are paying recurring expenses and you can get bank accounts in whatever country you’re doing deals in, that might be easier and safer than holding Wise balances. 

So, as far as this Wise review is concerned, you’ll have to get comfortable with the idea of holding balances with its multi-currency accounts.

The Benefit of Paying Domestically

Before this Wise review swings too hard toward the negatives, what we do like about Wise is that businesses can add on US, UK, or Australian accounts that receive domestic funds. 

To illustrate, let’s say you want to take money from someone in Australia and they’re more familiar with paying domestically. You can get a Wise virtual account and they can pay you in Australian dollars, in Australia. Again, that’s great for domestic payments. 

However, as a 7- or 8-figure entrepreneur, if you have a really sophisticated business structure, you’re probably going to have a business bank account offshore that accepts multi-currencies or at least gives you pretty reasonable spreads, making this particular Wise perk less necessary.

Certainly, Wise offers a good element of receiving money domestically – although, sometimes you could simplify by using a domestic company to receive payments as part of an offshore structure. 

So again, Wise may just be adding an unnecessary layer of confusion. If anything, the ability to receive money into balances is good, and then you can move that into your bank account. 

But if you are banking locally, the ability to hold money in balances is not as exciting. It’s a great option if you’re just in one country and you’re not doing the stuff we’re talking about. It definitely gives you exposure to different currencies. 

But it’s not the preferred method as it adds extra layers that could be simplified by opening your own account in the country in question.

The Trouble with Emerging Currencies

Even though Wise can be a great solution for exotic currencies like the Georgian lari or Croatian kuna as discussed above, there is more of a challenge when dealing in emerging currencies — where the money is going into emerging accounts. 

Wise may have stricter due diligence requirements with banks in those kinds of countries, which will lead to higher fees and more paperwork.

We’ve seen people who talk about sending money to Nigeria or Kenya, where Wise doesn’t have the emerging currency. Those transactions are subject to a higher level of scrutiny. Where any kind of new FinTech service, like Wise, falls short is that they’re designed for a less sophisticated user. 

On occasion, we have recommended Wise to certain clients who may, for example, need to fund a bank account in Europe for residency. Wise works great in those situations. 

But when you are sending repeated payments to unique places that are not within the main Wise network, you’ll find that it is not as well set up to handle those situations.

Most FinTechs really just want everyday users with basic needs.

We had a payment that was fine and everything worked out, but Wise was a little freaked out about it. Their customer service is generally very good, but we sent a payment, and – both on Wise’s end and the receiving bank – they were concerned about what was happening because it was out of the ordinary. Other people we have talked to have had similar experiences.

The other challenge is if you’re sending money to countries that are outside of their network, like Serbia, for example. They don’t have a facility in Serbia. You can’t send Serbian dinars. You can send U.S. dollars or Euros, but they don’t have the ability to balance out their books with unusual currencies outside of their network. 

They have to use the Swift network and they’ll charge you a little bit more for that. It’s a pretty reasonable fee, but the challenge is that you have less control over intermediary bank fees. 

Oftentimes, what we see in those situations, is that the recipient gets less and some of these suppliers won’t start working until the total amount is paid. 

We’ve had to send wires for 7 Euros because there was a fee not covered. 

The company refused to start any work until the 7 Euros was received. You have more control over those kinds of experiences, as well as any due diligence when you’re sending it directly from a bank instead of Wise.

When to Use Wise

Wise can play a role in your global personal needs to move money overseas but it likely won’t be the only tool in your belt that you should use. 

Wise is very good for sending money for property transactions, funding a bank account opening overseas where you’re moving money in different currencies, or for sending money to your foreign bank accounts. 

Wise is great for things like that.

But if you’re operating with any level of sophistication, whether it’s interesting countries that are more scrutinized or more sophisticated or larger transactions, having an actual bank is going to be a lot easier to navigate, easier to understand, and more helpful in going through the process of due diligence. 

They’re going to make sure that the right amount of money was received in the person’s account and you’ll develop that relationship that allows you to be in more control of what’s happening with your money and transfers.

So, is Wise safe? Yes, to an extent. It is a great option for many different financial transactions. But if you are operating at higher levels or have the ability to open a local account to conduct your business in a given country, that is usually the better option.

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