Who charges how much for foreign payments?

As readers of this blog are by now well aware, my most recent obsession area of inquiry has been the sending and receiving of international bank wires.  More or less by accident I have stumbled upon smart ways to receive international bank wires.  As I describe in this blog article, more or less by accident our situation is that for our patent firm, we now receive our incoming foreign bank wires free of charge through Afex.com, and for my personal bank account, I receive my incoming foreign bank wires free of charge because the bank is USAA.

As for the foreign sender of funds, if the foreign sender of money to our patent firm happens to be a customer of Afex.com, they can send money to us and they will likewise not have to pay any fee (other than perhaps a currency conversion fee).

But how about sending bank wires?  Who charges more and who charges less for sending bank wires to foreign countries?  Here is a specific example of what it would cost to send about ten thousand dollars to Switzerland by any of three different providers.  I find the price differences to be striking.

What triggered this was that yesterday a client of our firm (a delightful company in the Cayman Islands) found the need to file some international trademark applications (by which we mean Madrid Protocol applications).  Many readers are aware that the way it works with Madrid Protocol applications is that you file your international trademark application in what is termed your “Office of Origin” (“OoO”) and the OoO then “certifies” the application and forwards it to the International Bureau of the World Intellectual Property Organization (“WIPO”) which is located in Switzerland.  One of the important steps in this process is that the applicant must somehow pay the international filing fee to WIPO, and one option as to how to pay this fee is to pay with an international bank wire.

So the natural question that arises is, are there perhaps more expensive and less expensive ways to send international bank wires?

Well, you would think that this is the natural question, except that for some twenty years I had proceeded rather unthinkingly by using the same provider of foreign payment services.  It was maybe twenty years ago that I first signed up with Reusch, which then got purchased by Travelex, which then got purchased by Western Union, and is now branded as Western Union Globalpay.  And for twenty years or so, whenever anybody asked me how to handle paying foreign associates, I sort of habitually simply named this provider and explained that we had always used this provider.

But as I described in recent blog articles (here and here and here) I recently learned that there are younger, scrappier service providers in this field, one of which is Afex.com.  I had recently opened an account with Afex.

So as I say, yesterday came the moment when I needed to wire a bunch of money to WIPO on behalf of one of our clients.  We were filing three Madrid Protocol trademark applications, and the total of the fees to pay was 10110 Swiss Francs.

Now if you ask XE.COM how many US dollars it takes to equal CHF 10110, they will say it is $10,069.22.  This is what XE.COM calls a “mid-market” rate, derived from a midpoint between the “buy” and “sell” transactional rates from global currency markets. As XE.COM explains, their goal is to indicate the value of a currency that is not weighted towards buying or selling, and they hasten to explain that nobody actually pays that price.

It is understandable that if you pay somebody to convert US dollars to Swiss Francs for you, they have to make at least a little money on the transaction.  And it is understandable that if you pay somebody to get the money from your hands into the hands of the foreign beneficiary, they have to be paid at least a little money for their work carrying out that task.  So let’s see how much money it would actually cost, depending on your choice of service providers.

I actually priced the services of three different service providers:  Afex com, Wells Fargo, and Western Union Globalpay.  I will present the actual numbers in this table and then I will talk through the numbers.

provider	conversion	wire fee	total cost	difference	percent higher
Afex	$10,147.55	$5	$10,152.55
Wells Fargo	$10,341.65	$35	$10,376.65	$224.10	2.2%
Western Union	$10,735.90	$15	$10,750.90	$598.35	5.9%

You will recall that XE.COM said the “mid-market” US dollar value for 10110 Swiss Francs was $10.069.22.  So we can see right away that Afex was charging $78.33 more than that, or a currency conversion fee of about 0.78%.  In addition, Afex was charging a $5 fee to move the money to the destination in Switzerland.  My patent firm’s total out-of-pocket cost was going to be $10,152.55.  Again we understand that Afex needs to make some sort of money on this transaction — they cannot do everything for free.  In this case, Afex was going to charge about $78.33 for the currency conversion and about $5 for the bank wire.  (If WIPO had been an Afex customer, I would not have had to pay the $5 bank wire fee.)

But another choice would have been to go to the bank (Wells Fargo) where our firm has our checking account.  As you can see, the currency conversion Wells Fargo would offer was less favorable to us.  And the bank fee would be seven times higher — $35 instead of $5.  Overall, the transaction would cost $224 more or about 2.2% more as compared with Afex.

Then we get to the company that my patent firm has been using rather unthinkingly for the past fifteen years, Western Union Globalpay (née Travelex, née Reusch).  For the exact same transaction, they would convert the currency for $10,735.90.  This together with the wire fee would add up to $10,750.90.  This total cost would be $598.35 more than the total cost with Afex, or about 5.9% higher than the total cost with Afex.

What choice did I actually make yesterday, you might ask.  With any of these providers, you plug in all of your information and it gives you a “quote” and you can decide whether to commit to the transaction.  For the test that you see here, I had all three provider’s web sites open at the same time on three separate screens, and I was viewing three separate quotes.  I copied and pasted the numbers into a spreadsheet.  I then allowed the quotes from two of the providers to expire.  The way it actually worked out is that I actually chose to click “commit” with the Afex quote.  I permitted the other two quotes to expire without clicking “commit”.

Not to put too fine a point on it, I felt pretty good having saved some $598 for our client in the Cayman Islands.  (Maybe when I go to visit them, in appreciation they will buy me a drink!)

Of course today’s blog article is focused on one particular place to send money, on one particular date, in one particular currency.  Maybe the results would have been different had I been sending the money to a different country on a different day with a different set of currencies to be converted.  But the differences that I saw in this one instance are so striking that I can’t shake a first guess that our new provider Afex will turn out overall to save money for the clients of my firm, as compared with our provider of many years, Western Union Globalpay, across many destinations and currencies.

Maybe you, like us, have accounts with more than one wire transfer service provider.  If so, could you please try running some quotes in parallel for a typical transaction that you might send to some foreign country?  And could you please post your results below in a comment?

(See a followup article where I report a comparison of costs for sending money to Canada and Japan using two different wire transfer services.)