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Moving money internationally and exchanging currencies for any reason can be an extremely frustrating and complex experience. Between paying exuberant fees and navigating ever-changing exchange rates, transferring funds anywhere around the world can end up costing you a small fortune. But new digital options are growing in prominence and acceptance.
The old way
The most common way to transfer and exchange funds internationally – and the one you’re probably most familiar with – often involves hidden costs as a result of multiple bank functions. You end up footing the bill because of the transactions.
Bank lending rates, known as the “spread,” often apply to international and currency exchange transactions. Simply put, banks lend money to each other at lower rates but then charge you more to make exchanges for individuals and businesses. These costs are often fixed into fees when you use a traditional wire transfer system.
The SWIFT system and other international money transfer models rely on physical banks to communicate with one another to move money around. There’s a cost for that – and banks push that on to their customers.
If you’re traveling, you could use international ATMs for some money transactions, but there are significant challenges and hidden costs involved as well. Just like with banks, these undertakings often come with hidden fees that aren’t completely explained upon the transfer.
ATMs usually advertise the currency exchange rate, but they fail to acknowledge the service fees. Plus, international ATMs decrease the exchange rate to increase the service and processing fees.
The new way
Blockchain technology, a census-based system used to power cryptocurrencies, has changed how the financial world operates, especially internationally. Cryptocurrencies can be traded, converted to other currencies and transferred via a digital system that is more efficient, transparent and without some of the hassles associated with international ATMs.
Your cryptocurrency funds can be managed, spent and transferred with the aid of a digital wallet. Now that the form of payment has earned acceptance across the globe, more merchants are accepting it.
Cryptocurrencies are also a major asset for international travelers and businesses. Rather than converting funds to a preferred fiat currency of a specific nation, you can now just pay your debts using cryptocurrencies.
Another appeal of cryptocurrencies is how inexpensive the process can be. While there are still fees involved when transferring and converting cryptocurrency, sending money internationally is much cheaper than the traditional wire transfer system.
Michelle O’Connor, Twitter @Mq2oco