Remittance is rife to and from Ireland in the lead up to Brexit. Many people are either relocating or readjusting their portfolio in time for a possible no-deal Brexit with a messy UK-Ireland situation.
Selling property is a large cause for FX transfers, given that land owning laws and taxes will become different once British citizens no longer have jurisdiction (and vice versa ). The issue is, sending money overseas to and from Ireland is traditionally very expensive.
For example, almost all high street banks operate with around 3% FX margin. This means that in a €200,000 transfer abroad, you could lose €6,000 at the drop of a hat. Over the past decade, Fintech startups have addressed this problem. Of 50 companies and providers, almost all are likely to offer a better exchange rate than a bank.
Money transfer fintechs can offer better exchange rates because they have access to the interbank rate. In fact, some companies even leverage P2P transfers for total efficiency — depositing and withdrawing from users accounts in coordination with each other, meaning sometimes money isn’t even sent overseas.
On top of this, banks charge a international transfer fee regardless of the currency exchange. This is often a flat fee (i.e. £/€ 30 ), thus rendering small transfers very costly. In fact, this is a targeted service by some of the fintechs, such as TransferWise, who facilitate super fast and cheap small payments.
A borderless card, like TransferWise’s or Revolut’s, can mean that regardless of the Brexit outcome, spending money in the UK is almost as efficient as it can be. The rate will very closely resemble the interbanking, mid-market rate.
Ultimately, opting to transfer money from Ireland internationally with an FX company as opposed to a bank may save users thousands over the span of a year. It’s also a much faster process, particularly when sending from one money transfer company to another. E-wallets have much faster infrastructure than banks because they’re recently built.
High street banks continue to work with legacy systems built years ago that they cannot shake off - operations are so vast with multiple departments, endless branches and countless financial products. Leveraging all of a bank's systems with the latest digital infrastructure isn’t feasible for them both because of the sunk costs, but also because so many customers are resistant to technology.
Money transfer companies on the other hand are very much for those who are happy to use a service solely from one app, or possibly the website. There are some options however for those who need to transfer money from UK to Ireland and want to use the phone - just look out for the FX companies that have a dedicated account manager. This usually means that there’s guidance from someone over the phone to help you facilitate transactions.
The prevalence of money transfer companies
Money transfer companies are more than simple FX transfers - many are e-wallets that verge on banking capabilities. For example, the borderless card, along with savings spaces, rounding up functionality, and virtual bank details.
Money transfer companies will not only increase in popularity from Brexit because of the low-costs, but Brexit is a huge speculative opportunity for FX opportunists. The Pound-Euro is expected to be around 15% between the two outcomes of deal or no deal. The current price is factoring in the risk of no deal being reached, but it’s far from entirely reflecting that scenario - a scenario where the Pound will be expected to equal the Euro 1:1.
Many FX fintechs also offer hedging opportunities, which are rampantly popular in the face of an unpredictable Brexit. Mitigating that possibility of parity, or 15% the other way, is popular among small businesses who currently pay suppliers overseas.
We have seen online banks struggle in the face of COVID-19, but money transfer companies share no such problem. Overseas transfers are profoundly integrated into our economy. In fact, remote workers are all the more popular currently because it’s conducive to social distancing, and profit, given that labour can be found cheaper overseas.
What about online banks?
Online banks like Starling are a little different. They lay somewhere in-between traditional banks and money transfer companies in a lot of ways. The user experience resembles a FX fintech, but they’re regulated like a bank.
Whilst this is the best of both worlds, it isn’t when it comes to currency. Online banks do tend to outcompete traditional banks with FX margins, but they’re not using the same infrastructure as FX specialists, meaning you will likely pay a higher margin. Still, this could be a good middle ground if you’re not yet comfortable with using an up-and-coming FX fintech (though in reality, there are plenty of more established FX brokers offering fantastic rates. )