Wise uses a proprietary technology infrastructure to make international money transfers more efficient, faster and cheaper than traditional players in the industry.
How does it manage to do so?
The idea at the basis of TransferWise is to magically transform any international money transfer into a national one (usually free or costing much less than international ones), thus reducing costs for its users.
TransferWise holds bank accounts into every single country where it operates, maintaining a positive balance for each national currency (thanks to the incoming national payments from customers of that country).
When money needs to be converted into a different currency, TransferWise takes a part of the balance on the foreign bank account and transmits them to the corresponding local bank account of the recipient.
This approach allows to match opposite flows on money in different currencies, without having to convert them on the market (thus not paying fees to financial intermediaries).
With this peer-to-peer model, currency routes where the flow of money is pretty much balanced (e.g. GBP <> EUR) have very small operational costs.
For some routes where the flow of money is more unbalanced (e.g. USD / GBP to INR) TransferWise might still need to buy currencies on the financial markets, thus incurring into a higher cost. However, high trading volumes combined with the much lower costs on more “balanced” routes, permit to maintain these costs low.
TransferWise has local accounts in the countries they support. Because of that, when a user for example wants his USD converted to GBP, they can accept the payment to their local account in the US with no sending or receiving cost and pay out the GBP from their UK account, again with no sending or receiving cost.
The currency conversion itself is rather a virtual process of matching funds. There needs to be an equal amount of transfers in both currency directions to make sure liquidity remains on the accounts at both ends.
To sum it up, there is no actual expensive international money transfer involved, only local transfers that have minimal or no cost and that's why they can work around the banks' high fees.
What does this mean?
TransferWise mission is to bring fairness and transparency to the world of international money transfers. TransferWise will always offer the mid-market rate (the same exchange rate you see on Google), and thanks to the more efficient way of transferring money abroad described above, will apply the lowest possible transaction fee in a fully transparent way (something that your bank, Western Union or PayPal will likely not do).
Final Thoughts
I have used Wise to send money abroad multiple times over the years without problems.
You can save the fees on your first transfer by creating an account using our referral link.
Compared to other money transfer services like PayPal, Money Gram, and Western Union, Wise uses the mid-market exchange rate and that means you get the best bang for your buck!
With TransferWise, you always get the REAL exchange rate and a fair fee (some cents actually). Your first transfer is free if you sign up using my link.