Wise (formerly TransferWise) is a British fintech company known for its affordable currency exchange services. It offers a range of financial services including money transfers, international payments, and multi-currency accounts.
Advantages of Wise include competitive exchange rates, low fees for international transfers, and the ability to hold multiple currencies in a Wise account. Their services are convenient for sending money abroad and using the Wise card for cost-effective payments while traveling.
However, there are a few drawbacks to consider. Wise’s services may not be available in all countries, and the transfer speed can vary depending on the currency and destination. Additionally, Wise is primarily an online platform, so some individuals may prefer in-person banking options.
Wise, a London-based private company, was founded in 2011 as TransferWise and rebranded as Wise in early 2021. It is one of the pioneering fintech companies, initially offering affordable currency conversion and money transfer services. Over time, Wise expanded its offerings to include multi-currency accounts and direct receipt of funds.
Wise has experienced significant growth since its inception. By 2019, it had amassed over 6 million customers, and by 2021, this number exceeded 10 million. Customers collectively hold more than £3 billion in Wise accounts. The company’s services are available in numerous countries, including the United States and most of Europe. Notably, Wise facilitates monthly transfers exceeding £5 billion.
In July 2021, Wise accomplished its long-awaited initial public offering (IPO), making its shares available on the stock market.
Features
Wise, formerly known as TransferWise, offers a personal multi-currency account that provides numerous benefits. This account allows you to hold up to 56 different currencies, giving you the flexibility to pay and keep money in various currencies. For example, if you receive money in Euros, you can store it and use it for shopping in France, offering great convenience.
Additionally, Wise provides local account numbers in 10 currencies, such as a personal EUR IBAN or a USD routing and account number. These personal accounts enable others to send money directly to your account, streamlining the process.
While a personal Swiss IBAN is not available, you can use a Wise CH IBAN to top up your account for free. This means you can transfer money from your bank account to your Wise account without any fees.
Wise also stands out with its ability to send money to accounts in 80 countries. By leveraging local bank accounts in multiple countries, Wise ensures faster and cheaper transfers by bypassing intermediaries.
The inclusion of a Mastercard Debit card with your Wise account is another valuable feature. This card facilitates travel and cash withdrawals, and payments made with the card function similarly to online transactions, utilizing your existing currency balances or automatically converting them as needed.
Wise accounts are compatible with popular mobile payment platforms such as Google Pay, Samsung Pay, and Apple Pay, allowing for convenient and secure transactions.
Furthermore, Wise offers a virtual Visa card feature, providing added security for online payments. With up to three virtual cards available, you can create and use them for online purchases, and then easily delete or freeze them as desired.
In summary, Wise offers a wide range of compelling features that make it a comprehensive banking solution. Whether as a supplementary account or a potential replacement for traditional banking, Wise provides the necessary tools and functionality in a convenient and accessible manner, provided they support your local banking system.
Fees
One of the main advantages of Wise is its cost-effectiveness compared to traditional banks, so it’s important to examine their pricing structure. The fees mentioned here are in GBP, but they will be converted and rounded to your local currency if you have an account in another currency, resulting in similar fees across different countries.
Opening a Wise account is free, and you can hold multiple currencies, receive local IBANs or account numbers in various countries, all without any fees.
However, if you have more than £15,000 EUR in your account, a 0.40% fee will be charged on the excess amount. Hence, it is not advisable to keep substantial sums of money in your Wise account.
Adding funds to your account is free if you deposit a currency that your account can hold. Otherwise, currency conversion fees will apply. Receiving money into your account is typically free, except for wire transfers in USD, which incur a cost of $7.50 USD.
To obtain a Wise debit card, there is a one-time fee of £5 GBP, but no annual fees. Using the card for purchases is free as long as you have sufficient funds in the corresponding currency. However, if you need to convert currencies for a transaction, currency conversion fees will apply (more details below).
The Wise debit card also allows cash withdrawals. You can make two ATM withdrawals per month, up to a maximum of £200 GBP in total. Additional withdrawals incur a fee of £0.50 GBP per withdrawal, and if the total withdrawal amount exceeds £200 GBP, a 1.75% fee will be charged on the excess amount. Given these fees, it’s advisable to minimize frequent and large cash withdrawals with Wise.
The primary cost associated with Wise arises from currency conversions, which follows a complex pricing structure. Each conversion attracts both fixed and variable fees. The variable fee is a percentage based on the amount being converted. For conversions within your account, only the variable fee applies. However, sending money, even without a currency conversion, incurs a fixed fee.
Overall, Wise offers cost-effective services, but it’s important to understand the specific fees related to currency conversions and other transactions to make informed decisions.
Unfortunately, they do not have a table for all the fixed and variable fees. It seems like they are changing pretty regularly. Fortunately, they offer a fee calculator.
Here are a few examples as of July 2021:
- Sending 1000 EUR to someone in GBP: 0.50 + 4.08 = 4.58 EUR fee
- Sending 2000 CHF to someone in USD: 1.09 + 8.56 = 9.65 CHF fee
- Sending 10’000 USD to someone in INR: 6.28 + 52.69 = 58.97 USD fee
In general, you will pay between 0.40% and 0.80%. This fee is quite affordable. When you compare Swiss banks that will charge between 1% and 2% even for popular currency pairs, you can save money with Wise.
But there are some cases where the variable fee is significantly more expensive. For instance, converting from AED (United Arab Emirates Dirham) to USD would cost 3.46% in variable fees. This fee is very expensive. So, do not assume that everything is cheap with Wise.
Overall, Wise fees are fair. Wise is not free like some of its competitors, but they are low and very stable. Also, the base rate is extremely good at the interbank rate. So, they will have excellent currency conversions!
Is Wise safe?
When considering entrusting your money to a financial service, it is crucial to assess its safety, particularly in the event of bankruptcy. In the case of Wise, it is important to note that the company has been profitable for four years, which is commendable for a relatively young fintech firm. This profitability trend is significant, especially considering that many similar companies, such as Revolut, have not yet achieved profitability. Wise’s financial stability and growing profits are positive indicators.
Wise is not a bank and therefore cannot hold customers’ funds directly. Instead, they are required to deposit user funds into financial institutions. However, this also means that these funds are not covered by deposit protection schemes, as provided by traditional banks. For example, in Switzerland, bank deposits are protected up to CHF 100,000. However, Wise takes measures to safeguard user funds by ensuring that they are held separately from the company’s own business accounts. In the event of bankruptcy, these funds would be shielded from creditors’ claims.
Wise follows a diversification strategy for holding user funds by distributing them across different banks in each country where they operate. Additionally, a portion of the funds is invested in government bonds. While this investment strategy may slightly delay the return of funds in the event of bankruptcy, government bonds are generally considered secure in most countries, minimizing the risk to customers’ funds.
For example, in the UK, Wise’s UK customers’ funds are deposited in cash across six different banks in three countries, with 52.68% (as of June 2021) invested in government bonds in the UK and the US.
Overall, it can be concluded that holding money in Wise accounts is relatively safe, with an acceptable level of risk. While some level of risk always exists, Wise’s practices of segregating user funds and diversifying holdings across banks, combined with their profitability, provide reasonable assurance for the safety of customer funds.
