At some point in your expat life in Mexico you may need to send money home or ask for money to be sent to you. How do you do it? Using international money transfers in Mexico is getting a lot easier and less expensive these days through a proliferation of online services that now compete with banks and other traditional financial institutions.
To get a better understanding of how these digital online services work, we spoke with François Briod, the Co-Founder and Chief Executive Officer of Monito, a comparison website for money transfer services.
“The International money transfer industry is big business,” Briod said. “We estimate that about US$1 trillion is sent each year by individuals, and more than 20 times that amount for business. About US$30 billion is sent to Mexico annually and US$3 billion is sent from Mexico to other countries.”
Briod started Monito four years ago after several years of experiencing frustration sending money to Africa from Lausanne, Switzerland, the company’s headquarters. His company provides in-depth reviews of digital money transfer companies, scrutinizes their reputations and rates them on a scale of 1 – 10 before including them in their comparative recommendations. After listing the best options, Monito provides a brief analysis of them based on your specific needs and cost.
For example, I wanted to know the best option for sending US$1,000 from the United States to Mexico. Monito turned up 15 different money transfer options and showed me the least expensive service while recommending several alternative options. InstaReM was shown as my number one option. It was the least expensive of all 15 displayed, had zero transfer fees and a very competitive dollar to peso exchange rate. The total cost of using InstaReM, according to Monito, was US$0.53.
“These new digital online services send money more conveniently and cheaper than traditional ways like banks or agent-based services,” he said. “The least expensive way to send US$1,000 from the U.S. to Mexico could easily cost under US$1. If you used a bank wire transfer, the cost would be many times higher because of their fee structure.”
Traditional bank-to-bank money transfers are called bank wire transfers. A wire transfer moves money from one bank or credit union to another using financial networks like SWIFT (Society for Worldwide Interbank Financial Telecommunication). The SWIFT network includes more than 10,000 banks and financial institutions in more than 200 countries.
Using bank wire transfers require you to provide your bank account information to a person or business, whether you are sending or receiving money, and provide additional information based on the amount of money you are wiring. Transaction time is usually one business day, but could be longer. Fees vary but using a bank is substantially more expensive than one of the new digital online money transfer services. It usually costs more than US$30 to send a wire transfer and about US$10 to receive one. If you use a credit card, you will pay cash advance fees at a higher interest rate and pay fees on the transfer. Currency exchange rates are also higher through banks.
Briod said that banks make most of their money by giving you an exchange rate that is worse than the markets or published exchange rates.
“To send US$100 from the United States to Mexico, for instance, could be less than US$1 by using the cheapest digital money transfer option,” he said. “In addition to the flat fee charged by banks, they make quite a lot of money by giving you a much worse exchange rate.”
A traditional retail money transfer service like Western Union can also be used to wire money. Senders can walk into a retail location with cash, send money to the recipient and the recipient can walk out of a retail location in another country in less than an hour with his/her money. If you transfer funds from your bank account, it will take longer. Use a credit card, and you will pay extra fees. You can also use Western Union online.
“The industry has been waking up in the last five years, and it’s now a really changed game,” Briod said. “The savings are huge. We calculated globally from the information we have today on Monito that consumers sending money abroad could save US$28 billion in fees if they used these digital money transfers.”
Moving billions of dollars around the world digitally may give pause to some who worry about the safety of their money, but Briod told us that the industry generally is well-regulated.
“It’s been more and more regulated due to money laundering and financing laws,” he said. “Every financial service has to know with whom it is dealing and review the names across the database of jurisdiction of people it can do business with. Money transfer services are usually regulated as money transmitters, so they are not as regulated as the banks, but they are already quite strictly regulated by the country where the money is being sent. A money transfer operator like Western Union will have maybe 60 to 100 different licenses and different authorizations, for example. Compliance is a big part of the business.”
Are there any restrictions on transferring money? Briod said it depends on the amount you want to transfer. Larger amounts require more compliance documents because of money laundering concerns. If you are sending amounts under US$100, he said, it is as easy as buying a pair of shoes online. If you want to send millions, you will need to prove your identity, show how you got the money and explain why you are transferring the money. Restrictions and enforcement of money transfers are mainly the responsibility of individual countries.
We asked Briod what expats need to keep in mind if they plan to transfer money from Mexico to another country.
“I think the biggest factor is the exchange rate,” he said. “Convert money at the right time to save money. I receive an email every afternoon with the daily rates, so I am constantly watching them and know when to make the transfer.”