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How To Make Cheap Money Transfers from South Africa
Global money transfers are a necessity for billions of people today. This is demonstrated by the fact that only last year there was $529 billion sent in remittances worldwide. Bear in mind too that this figure doesn't include other types of international payments, such as purchasing or selling goods and services.
The critical thing to understand is that the international money transfer industry is on the rise today because the demand for this service has increased exponentially. And yet the options available for performing such transfers are still few. What's even more important is that the majority of these options are banks, which make transfers extremely expensive.
Migrant workers, business owners, and many other people who need to use international money transfers lose a considerable amount of money each year due to the high fees and lousy currency exchange rates offered by banks as well as top money transfer companies, Western Union and MoneyGram.
However, the situation is starting to change in response to ever-growing demand.
How Fintech is taking on the challenge
A variety of Fintech services today offer cheaper, faster, and equally secure transfers to those provided by the banks. These companies have emerged everywhere, even in remote countries like South Africa, thus bringing residents numerous opportunities for financial and business growth.
Leading providers in the money transfer industry of today are competing to offer their services as cheaply as possible. The technology used means that they make revenue from the volume of processed funds instead of cost per transaction. Therefore, they re able to keep their costs down to a minimum.
This allows them to act in direct competition to even the biggest banks and will, in all likelihood, result in them taking an increasing share of the market once these companies become genuinely global. Unfortunately, local regulations in many countries prohibit them from reaching their full potential at this time. South Africa is an excellent example of this.
Can you transfer money cheaply from South Africa?
Transferring money from South Africa is a challenge in itself. The default route to take when you need to send money abroad is to go to a bank. However, when doing this, it will quickly become apparent that transfers are rather expensive. You should prepare to lose about 10% of the total transfer amount in fees and currency exchange margins. Also, to legally transfer money from this country using a bank, you might need to:
- Obtain proper tax clearance
- Provide evidence that shows the origin of funds
- Obtain Reserve Bank clearance
- Provide declarations of adherence to allowances
Depending on the situation, there may also be additional documents and permits which you'll need to get. But the good news is that you don't have to restrict yourself to expensive and complicated bank wire transfers today, as there are now alternative sources of funding for small businesses. There is also a variety of options that offer cheap, secure, and fast money transfers.
Leaders among these companies are Currencies Direct, TransferWise, Firstrand, and PayPal. You can use these services to simplify the money transfer procedure. But their main advantage is affordability. Using online money transfer services, you will pay only minimal fees and also get close to the mid-market currency exchange rate.
This means that the transfer through one of these services can cost you 1-3% instead of 10%. Because the high cost of international money transfers, remittances, in particular, is one of the most significant issues for the economy of African countries, this affordability has such an impact that bank transfers run the risk of becoming obsolete if these services become more widely available. Unfortunately, there are only a few options in South Africa today. The restrictions on money transfers out of the country are identifiably a factor in this. Very few companies have the license to send money from the country, and you'll need to do quite a bit of research even before sending money to South Africa.
Even fewer international money transfer companies have a local presence, which is essential to performing certain types of transaction. Please note that even the giants of the money transfer industry, like Western Union, are unable to make some types of transactions, for example, payments for commercial goods and services.
Cryptocurrency is making it easier than ever
Therefore you will need to research every money transfer option you have carefully and make sure that the transfer you are about to make is legal under the local regulations. This will severely limit your choices, so getting the cheapest transfer might be difficult for now. The money transfer industry continues to evolve, and technology is the most significant contributor to its development. Many say that the future of money lies in blockchain and cryptocurrency, which will make international transfers free as well as much faster than the methods available now.
However, crypto hasn't even gotten close to fiat money yet, and with the many regulatory issues, it has, it is unlikely that crypto payments will become the norm anytime soon. So as things stand today, people mostly rely on money transfer companies as an alternative to banks.
There are precious few of these in South Africa but as the demand for their services grows their number should increase, providing residents of the country with a more effective means to send and receive money from all over the world.
About the author
Kate Bregovic is a wife, mother, freelance writer and fitness enthusiast. She covers many topics – from business management trends to fitness regimes. When she's not writing, she's planning outdoor activities for her family, cooking or working out at the gym.
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