There are several reasons why people might want to send money to Africa from other countries, including supporting family members who live there, investing in emerging businesses, and paying for education or healthcare. There are many more reasons, but these are just some of the primary ones.
The difficulty that many people face when trying to send money to African nations from the US is that high fees are often attached to this process, as well as poor exchange rates, which can result in the recipient receiving significantly less than they should.
In this article, we will examine the factors that influence transfer costs and discuss strategies to minimise them, enabling recipients of the funds to benefit as fully as possible.
Why Traditional Methods Cost More
When we refer to “traditional methods,” we typically mean transfers involving established banking institutions. These can be more expensive to transfer money internationally than some of the newer fintech companies that have emerged in recent years.
There was a time when making transfers via a bank or wire transfer service was the only feasible way to move money across international borders, and many established financial institutions are still tied to their outdated methods.
Banks often have numerous branches worldwide, which can be costly to operate. Some of the cost of this is passed on to the customer when they make transactions. They will also have numerous legacy systems that are being slowly phased out, but which will continue to incur higher costs until they are entirely replaced. These costs are also usually passed on as service charges.
When transferring money internationally, banks will often route funds through intermediary banks, and these will often add on their own fees, on top of the fees levied by the financial institution you are using. This can lead to increased transfer costs.
Key Factors That Affect Transfer Costs
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, still plays a crucial role in all traditional international banking transactions, enabling stringent anti-fraud and anti-money laundering checks on all transactions. This can add to the length of time that transactions can take, and the added security is one reason why banks often charge a higher service fee for money transfers.
Although they don’t transfer the money themselves, SWIFT acts as a secure messaging service for banks to notify their counterparts about wire transfers, both inbound and outgoing.
Transactions involving SWIFT can take up to four days to complete, which is far from ideal when compared to more modern methods of international money transfer.
Banks may also offer a transfer rate that is weighted to give them a larger share of the transaction. It is therefore vital to review the terms being offered before agreeing to any bank or wire transfer.
Tips to Minimize Transfer Costs
If you are looking to minimize the costs of transferring money internationally, the new generation of FinTech (Financial Technology) companies could be ideal for you. BOSS Money, for instance, provides fast and secure money transfers to African countries. If you are looking for ways to send money from the US to Ghana, this is an excellent option, as the app openly shows the amount the recipient would receive.
As FinTech companies don’t have the same overheads as traditional banks and financial institutions, they can afford to operate a leaner and more efficient business. They aren’t tied into leasing premium real estate in city centre locations and don’t need to have fancy headquarters and thousands of public-facing staff.
When deciding which FinTech company to use, consider the costs and compare them to those of more traditional options. Shop around and find the best deals available. These will differ depending on the country to which you want to send money. They may also differ based on whether you are already signed up to a particular app, as they may offer better deals for their members.
Some FinTech companies offer better rates on international currency exchange around the holiday season, so it may be worth consolidating several transfers into one to take advantage of these time-limited rates when they appear.
Fluctuations in currency exchange rates can also impact the amount that the recipient receives. Try to time any money transfers to coincide with favourable fluctuations for the receiving currency in the pair.
Traps to be aware of
Due to the lucrative nature of international money transfers, they are often heavily targeted by fraudsters who will go to elaborate lengths to steal personal information and money. If you receive an unsolicited funds request that claims to be from someone you know, use different contact details that you know to be legitimate to ask if it was really them. Trust your instincts if it seems off in any way, and don’t send money until you are sure that they are who they purport to be.
If you are someone who gives to charities based abroad, take the time to verify that they are real and registered with the appropriate oversight body in their country.
When sending money internationally, always look out for hidden fees and read the small print carefully so you know what you are signing up for.
Conclusion
Sending money to Africa can often incur costs that are disproportionate for many reasons. Some of these practices are institutional, such as banks passing on their costs to customers and providing exchange rates that benefit them, rather than offering a more accurate rate.
Modern FinTech companies offer the chance to send money internationally for much lower costs because they don’t have the same level of overhead as traditional financial institutions. Shop around to find the best deals on money transfers to your desired country.
Kyle Lewis is a seasoned technology journalist with over a decade of experience covering the latest innovations and trends in the tech industry. With a deep passion for all things digital, he has built a reputation for delivering insightful analysis and thought-provoking commentary on everything from cutting-edge consumer electronics to groundbreaking enterprise solutions.
