Can we make digital money transfer great again?

As a freelancer working with people around the world, I tend to use these tools not because I particularly like any one of them, but because I don’t have a choice. I grudgingly accept the long wait times and obscenely huge processing fees for the same reason I keep riding that crappy train to work: because there simply isn’t a better option.

While digital money transfer companies highlight benefits like fast transfer-to-bank times, good exchange rates, and low fees, there’s not one of them that has it all. Every time I think a new solution is the right one for me, I look for the catch–and I always find it.

Xoom, for example, offers super-fast transfer speed and, because it’s operated by PayPal, enters the market with established credibility. But the speed and reputation come with a price. Charging up to $4.99 for a bank account transfer, profiting from poor exchange rates, and charging the sender additional fees on top of that, extra fees are so high that users are presented with a choice: to suck up the extra cost for the sake of convenience and speed, or to instead go with a platform like TransferWise, which is less expensive but slower (in my experience, transfers take around 3-4 days to receive).

But even TransferWise (as well as a third platform I’ve tried, Revolut), is more expensive than it lets on. More than once, I’ve checked my bank account only to find that I’ve received far less money than I thought I would. The most disturbing thing isn’t even that I’m charged, but that I have no idea where these charges are coming from.

Hidden fees

So, I did a bit of digging. I found that in addition to the costs of bank account and credit card transfers and low exchange rates, there are plenty of fees that companies are far less transparent about. It’s precisely this lack of transparency that bothers me so much since it makes it hard to calculate which platform will take less of my money, as well as how much I should charge my clients by way of a processing fee.

First, companies often charge different fees for different amounts of money. A platform might say they’re taking only a very small percentage of your money, but it’s easy to miss the fine print: that this low rate is only for transfers either above or below a certain amount.

Second, companies aren’t always transparent about the fact that they charge different fees for different currencies. A platform might market itself as providing low-cost (or even free) transfers from dollars or euros, but might be vague about the precise rates for other currencies. Many companies even take a higher percent of your money if you’re transferring currencies other than euros or dollars, in addition to charging a high exchange rate for the conversion.

But hidden costs are the most hidden when third-party players are involved. Zhana Dar, founder, and CEO of transfer platform Fin.do, explains the biggest source of these hard-to-detect extra costs: “Such fees are incurred when using a service provider’s payment solution and are charged by the bank. These hidden costs include wire transfer fees, double currency conversion, or up to 3 percent transaction fee for credit card payments when topping up service provider account,” she explained.

In other words, many platforms require users to go through their banks, such as when topping up their accounts. When you top up your account, either via a domestic or international bank transfer, your bank is almost certain to charge you a transfer fee. On top of charging you for the transfer itself, your bank will probably deduct a handling fee, as well as a higher exchange rate than the transfer platform offers.

These platforms rely on the fact that the total accumulation of user costs is nearly impossible for users to predict. Because there are so many variables–types of currency, amount of money, international versus domestic transfer, and the possibility of third-party players–information about fees is convoluted.

It’s so easy to send money with the click a button, and so much harder to unearth–and then calculate–all these hidden costs, that we tend to sign up for these platforms with blissful ignorance and just hope for the best.

But are there better options?

Perhaps, the most painful thing about these flaws is that there’s so much promise in digital money transfer done right. It’s more relevant than ever in today’s economy, in which people (millennials, in particular) are depending on these platforms to become digital nomads, often working freelance or with companies across the globe for the sake of increased flexibility and convenience.

Digital money transfer solutions are also key to our global economy and play an essential role in providing a stable source of income and money storage for people around the world. This is particularly true for those who live in societies without reliable banking systems, since digital money transfers, along with digital wallets and payment systems, are a better, safer solution than managing cash alone.

With so much potential for such platforms, it’s imperative that we find solutions that whittle away the obvious downsides. There shouldn’t be an intrinsic trade-off between convenience and hefty fees.

But there is a bright side: The numerous flaws present in the digital money transfer industry today also mean that the industry is ripe for competition. I hope that, as the demand for better solutions grows, companies will work harder to eliminate some of the most common issues users face.