TransferWise: How It Impacts Global Money Transfers and FX Rates

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by

David Lee
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In today’s fast-moving world of international finance, TransferWise (now called Wise) has reshaped how people and businesses move money across borders. For anyone sending funds to family abroad, paying an overseas freelancer, or managing a global payroll, it offers a smart, cost-saving alternative to traditional banks. This platform is important because it gives users access to the real exchange rate, lower fees, and faster transactions, making global finance fairer and more accessible. With a focus on transparency, it has become a top choice for millions seeking better ways to handle foreign exchange (FX) rates and international transfers.

What is TransferWise

It is an online platform that enables individuals and businesses to send money internationally without the hidden fees or inflated FX rates that banks often apply. Sometimes called Wise or Wise Banking, it acts like a digital bank, though it doesn’t hold a banking license. Instead, it offers features such as multi-currency accounts, transparent fees, and real mid-market exchange rates, providing a wise account experience. You can think of it as a smart, digital service that connects currencies, people, and businesses around the world, all with the goal of saving users money.

Breaking Down

Let’s break it down further. Traditional banks and money transfer services often charge a fee upfront and hide extra costs in poor exchange rates. It differently by using the real, mid-market exchange rate you see on Google, then charging a small, clear fee. For example, if someone in the United States wants to send $1,000 to a friend in Europe, It matches that transfer with someone in Europe who wants to send money to the U.S., so funds rarely cross borders. This system lowers costs and speeds up the process, which is why many people now consider a wise transfer smarter than bank transfers.

It also offers a multi-currency wise business account, which helps companies pay invoices, salaries, or contractors overseas without worrying about poor rates or surprise charges. For freelancers, entrepreneurs, and small businesses, the ability to accept and hold money in multiple currencies within a single wise account is incredibly valuable. You can hold over 50 currencies, switch between them at will, and pay local fees instead of hefty international ones. This flexibility has made TransferWise a favorite for global professionals.

For example, a graphic designer in Brazil can invoice a client in the U.S. and get paid in dollars directly into their Wise account, converting to Brazilian reais only when they want, at a transparent rate. Likewise, a startup in Berlin can pay its U.K. software developer in pounds using local payments, skipping expensive international wire fees. This model makes it both personal and professional, appealing across industries.

History of TransferWise

The story of TransferWise began in 2011 when Estonian friends Taavet Hinrikus and Kristo Käärmann decided to tackle the high costs of cross-border transfers. Hinrikus, who worked for Skype, wanted to send euros home, while Käärmann needed pounds in the U.K. Instead of going through banks, they simply swapped funds between themselves, saving money. Realizing that others faced the same problem, they created it. The company rapidly grew, hitting major milestones like launching in the U.S. in 2014 and processing billions in transactions by 2015. In 2021, it rebranded as Wise to reflect its broader range of services.

YearMilestone
2011TransferWise founded by Hinrikus and Käärmann
2014Entered the U.S. market
2015Reached $1 billion in transfers
2021Rebranded as Wise

Types of TransferWise

Personal TransferWise Accounts

Personal TransferWise accounts allow individuals to easily send money to friends and family overseas. By using local transfers instead of traditional cross-border methods, users enjoy faster transactions and significant savings on fees.

Business TransferWise Accounts

Business TransferWise accounts are designed for companies that need to pay international employees, contractors, or suppliers. These accounts offer smooth multi-currency management, making global business operations more efficient and cost-effective.

Borderless Wise Accounts

Borderless Wise accounts, also known as multi-currency accounts, let users hold, receive, and convert over 50 currencies. This flexibility allows both individuals and businesses to manage international finances seamlessly and make conversions when rates are most favorable.

TypeDescription
PersonalIndividual money transfers across borders
BusinessCorporate international payments and payroll
Borderless (Multi-currency)Flexible accounts holding multiple currencies

How does TransferWise work?

TransferWise operates by using local bank networks to avoid cross-border fees. When you send money, you pay into TransferWise’s local account in your country. Then, TransferWise pays your recipient from its local account in their country. This clever system cuts out expensive international transfers. For example, if you send euros to someone in Germany from the U.S., TransferWise uses funds from its euro account rather than actually moving your dollars across the ocean. You get the real exchange rate, see the fee upfront, and avoid hidden costs. This model makes it a smart wise bank alternative for many.

Pros & Cons

Before you jump in, let’s look at the pros and cons.

ProsCons
Transparent, low feesNot a full-service bank
Uses real mid-market exchange rateNo cash pick-up option
Fast transfers, often same-dayLimited support in some countries
Easy-to-use app and websiteRequires internet access
Offers multi-currency accountsIdentity verification needed

Uses of TransferWise

People and companies use TransferWise in many creative and practical ways.

Personal Remittances

Sending money to family overseas has never been easier. With TransferWise, you skip high bank fees and get more value for every dollar or euro you send.

Business Payments

Companies use TransferWise to pay international suppliers, employees, and contractors, keeping costs predictable and manageable.

Freelancers and Digital Nomads

Remote workers love TransferWise because it lets them get paid in multiple currencies, hold funds, and switch currencies when rates are favorable.

Travel and Study Abroad

Students and travelers use TransferWise to pay tuition, rent, or manage everyday expenses abroad, avoiding costly international ATM or bank fees.

Investments and Wealth Management

Investors transfer funds between accounts or across borders using TransferWise, ensuring they get the best possible exchange rates without extra charges.

Resources

David Lee

David Lee serves as an economist at Tech24. He earned a bachelor’s degree in economics from the University of Chicago and a master’s degree in finance from the MIT Sloan School of Business. His career includes: From 2008 to 2013, he worked as an economic reporter for the Wall Street Journal, where he wrote various economic and financial articles. Since then, from 2013 to 2017, he worked as an economic analyst at Bloomberg, where he analyzed global economic trends and wrote reports. From 2017 to now, he has provided in-depth analysis and insights in technology economics as an economic analyst at Tech24. David Lee’s specialty is global economic trends, financial market analysis, the convergence of technology and economy, and start-up and venture capital. He won the “Best Economic Reporter of 2019” award from the International Economic Journalists Association and received great acclaim for his economic analysis report titled “The Impact of Technology on the Economy.” In addition, he contributed to the expansion of his readership with the series Global Economic Outlook conducted by Bloomberg. His vision is to provide readers with in-depth insights into the convergence of the global economy and technology through Tech24, and to help them make better economic decisions. Emphasizing the positive impact of technology on the economy, he wants to explore strategies for sustainable economic growth.