Transferring money from Australia – Top 5 Ways

In the past few years, Australia’s net outflow of capital has become positive. This means that Australians are investing more overseas than they are receiving from foreign investment. There are a few reasons for this, and some revolve around Australia’s cost of living becoming increasingly high, wages and opportunities abroad becoming attractive, and property becoming a more realistic investment abroad. 

This has led to a surge in sending money overseas, which feels unusual for a traditionally insular economy. New Zealand, the UK and the US are the three most common destinations, though the US dollar topped the list regarding denomination. 

This brings into question, how exactly are Australians sending this money, and are they doing it in the most economical way possible? In no particular order, we detail the top 5 ways to send money out of Australia and which ones are right for different situations.

Bank Transfers

International bank transfers have been the go-to reliable method for sending money internationally for generations. Customers type in the recipient’s SWIFT or IBAN code and the funds are transferred from one bank to another. The actual journey can be quite complex, sometimes going through multiple intermediaries to finally reach its destination. But, importantly, customers are none the wiser – the money always shows up.

Wiring money through SWIFT (which is actually a messaging system, not where the money travels through per se) is the standard that banks all around the world adhere to (besides some nations like Russia and, to some extent, China, which is now pushing its own CIPS system).

There are two giveaways that the SWIFT standard is dated and, at times, complex. Firstly, the transfer may take a few days to reach the recipient’s bank account. Secondly, it may cost a fixed fee. This fee, which is often $20-30, is fine for large transfers, but it can become unviable for small and medium-sized transfers.

Perhaps worse, which is not the fault of SWIFT but the banks, is that it’s rare for a bank to be transparent and competitive regarding exchange rates. It’s quite common to lose 2-3% of your total transfer amount in exchange rate spreads. What’s worse is that this spread isn’t a “fee” per se, meaning it’s often less obvious. Unlike fixed fees, the spread isn’t too punishing for smaller transfers but it becomes a big issue for large or frequent ones. 

Online Money Transfers

Money transfer companies are the self-explanatory evolution regarding the problem with banks. Although they cannot fully replace banks (most do not obtain the highly restrictive banking license), they mimic some of their services. Sending, spending, and receiving money are their three key services.

Such companies, like Revolut and Wise, provide spending cards and accounts that behave like bank accounts, where you’re provided with full bank details, but they are not technically a bank account, nor do they have deposit protection insurance.

But, this lightweight and minimal approach allows them to be lean enough to cut costs to the bone, and this is reflected in ultra-competitive exchange rates and transfer fees. There is often one or the other regarding a transfer fee and exchange rate spread, and the total cumulative amount is often around 1% or under.

Customer support may also be lean unlike banks, however, the in-app experience is usually far superior to that of banks. Due to not being weighed down by legacy systems, online money transfers are highly innovative and pride themselves on a rapid, intuitive experience that can get money from A to B quickly and cheaply.

If you’re wondering how they do this, the answer lies in being more flexible and open to various transfer methods. They use SWIFT, but only when it’s the best method for that transfer. They may use some treasury trickery too (i.e. simultaneously debiting and crediting accounts), as well as offer various options to the customer about whether they want to spend more on faster delivery.

Currency Brokers

Of the five methods on this list, money transfer companies and currency brokers can be the hardest to differentiate. Both types of companies can operate without a banking license, and sometimes a company can be loosely defined as being both of these.

A currency broker is a company that specialises in facilitating international transfers, but they often provide a more comprehensive set of currency-related services – this is why they’re sometimes referred to as foreign exchange companies. While the money transfer companies help send, spend, and receive money, it’s a matter of doing it today and in a simple way. 

Currency brokers do these foreign exchange services in a more sophisticated way, such as sending a very large amount and receiving a bespoke exchange rate that is negotiated over the phone. And, if the money is sent for property investment, they may advise you when to do it, and discuss if you want to lock in a rate ahead of time to protect against a volatile currency.

This is why firms listed on MoneyTransfer Australia, like OFX, are so different to Wise, despite commonly being referenced in the same sentence together. The biggest giveaway of whether a company is a currency broker and not a money transfer company is if they have a dedicated dealer. You do not need one for simple, day-to-day spending. But, for businesses who want to ensure they’re paying their suppliers in an optimal way that manages risk, suddenly a dedicated dealer is vital.

Fortunately, such dedicated dealers often come free at currency brokers – but who are cheaper overall? Generally, the lightweight nature of money transfer companies makes them cheaper and faster for small, frequent payments (some companies let you send under $1 to the UK with no fixed fee). Currency broker fees are often around the 1% mark, but this can be brought down with larger transfers. 

Plus, much of the money you save is in managing risk better. This needn’t be just for investors and businesses, but those receiving a pension or freelancing income can benefit from securing hedging products.

Cryptocurrency Transfers

Cryptocurrencies such as Bitcoin have become a novel way to send money abroad, with many claiming they are the future of borderless payments. The first thing to clarify, however, is that the white papers and hypotheses surrounding cryptocurrencies do not always reflect reality.

In theory, it could be possible to send Bitcoin from Australia to the US with no fees – something that feels impossible with fiat currency. However, it’s not free for fiat because there are intermediaries to ensure everything is secure and in order. With Bitcoin, energy is required by miners to verify transactions, and this costs them electricity. So, the fees on a network are dynamic, meaning it costs more when it’s congested. 

This could still very well be cheap and efficient, so the question is whether the sender already holds Bitcoin (because exchanging fiat to Bitcoin incurs another set of fees), and whether the receiver will also want the Bitcoin, or if they will exchange to fiat too.

Both risk and fees increase for users who are not experienced with crypto. For example, using a hot wallet like Coinbase increases the risk (the user does not own the keys in this scenario) and charges both a withdrawal fee and an exchange fee. Furthermore, it is possible to fully lose funds when sending crypto to the wrong wallet, and there will be no customer support team to help.

Ultimately, crypto still has a way to go when it comes to being more accessible and closer to its theoretical claims regarding its efficiency. For now, it’s very useful for a very small number of people.

Remittance Services 

Remittance services, such as MoneyGram and Western Union, are one of the oldest forms of transferring money. It refers to sending cash from one location to another, making it particularly useful for senders or receivers who do not have access to a bank account. 

While you may think this is uncommon in Australia, which is a highly developed nation, it’s still used by many working migrants who want to send cash back to their families. Western Union has over 500,000 locations, where there’s at least one in almost every nation in the world.

Because of the higher risk involved with sending cash, the cost of remittance is higher than with bank transfers – it may be anywhere from $5 to $100. Fees also vary depending on the amount and what country you’re sending money to. Given many underdeveloped nations often have a volatile exchange rate, dealing with these currencies also incurs higher exchange rate spreads.

Remittance isn’t so much the best option, but it’s fantastic when it’s the only option. The convenience and accessibility to international cash transfers have contributed heavily to wealth redistribution from high-wage countries to low-wage countries.

How to decide on the right method

With so many options, we need a reliable way of determining which is the best for us. Many ask where to find the best foreign exchange rate, but often it depends.

And, although it’s tempting to pick one to suit your needs, it only needs to suit the needs of the transfer. In other words, open yourself up to all of the use cases you’re exposed to, and be open to using multiple methods on a case-by-case basis.

Why are you transferring money?

The reason you’re sending money is going to have a big influence on the method of choice. If you’re sending money to family and friends, the speed may not be as important as paying for services or payroll. 

This is when you consider the needs of the recipient and rule out the methods that do not work for them. Do they need it in cash, crypto, or to simply receive it in their bank? Are they old and unaware of how to use mobile banking? 

Where are you transferring money?

Where the money is headed is going to play a role. Not necessarily in the decision of the method, but the decision of which company. You’re not going to find the best Euro rate by using an Asian currency provider, although some companies do a very good job of being global. So, decide whether you’re sending money using just one currency, to one economic region, or if it will be global. 

How much are you sending?

The amount you want to send is crucial to picking the right method. You may well be a crypto enthusiast, but most will still feel uncomfortable with sending $100,000 on the blockchain – either because of sending it to the wrong wallet, the currency devaluing during that time, or your exchange getting hacked.

Generally, if it’s a very small amount, you will either stick with your bank, for convenience, or choose the more economical option of a money transfer company. The latter is actually more convenient, with one-tap payments and such being easily set up, if the user is already signed up.

For larger payments, it’s difficult to look past currency brokers. While the ultimate security of banks is compelling, it comes at a great cost. And, while currency brokers may not be quite as regulated, they’re still going to be regulated by the likes of the FCA, and so are very secure. The larger the transfer amount, the more you can lose in fees and currency risk.

When are you sending it?

This is one that often goes overlooked, but it plays a big role in your sending method. Most money transfer companies now allow for scheduled and repeat transfers. For example, sending your rent money from one account to another every Thursday. Plus, if you’re in a rush to split a bill, you cannot compete with the speed of an international money transfer company.

However, if you’re sending your rent, pension, or wage every week, it means you’re certain about your future transfers – so your context grows. And, when you add up the value of these individual payments over the long run, it may reframe your use case from dealing with small amounts to large amounts. 

In other words, it may now seem wise to use a currency broker, who can help lock in your future exchange rates and deliver the funds automatically for you. It may even perform the transfer prematurely (if agreed) when the FX price dips and becomes preferable.