If you are living as an expat or are running a business relying on freelancers or overseas employees, you surely know the struggle of sending money each month and how costly it can become. The many fees that international money transfers can incur and the currency exchange rates can easily diminish your initial budget.
Many have used PayPal over the years, but lately, more and more people are satisfied by the service provided by TransferWise. So we decided so write an article comparing them both to see which provides more value to its customers.
Article Summary – Who is the Winner:
Although both are good options for making money transfers online, TransferWise is a better choice for the following reasons:
- Smaller fees.
- Better currency exchange rates (view TransferWise rates).
- No hidden fees.
- Geared towards both small remittances payments and large transfers.
- Disadvantage: Slightly longer on-boarding process.
Transferwise Sign Up – View Live Rates
We will go straight to the comparison and skip any introduction for each company, as you can read more about them in this Transferwise review or at the PayPal.com website.
Is TransferWise safe? Is Paypal safe? Are these legit companies or scams? There are genuinely good questions, considering you a dishonest company can easily rip you off your funds without transferring them anywhere. View our piece on money transfer scams and scandals here.
Paypal is one of the earliest startups of the internet that was developed even prior to the dot com bubble of 2000. It was established by 4 enthusiastic youngsters in 1998, and merged with X.com (owned by Elon Musk) in 2000. It went on an IPO in 2002. Shortly after the IPO it was acquired in full by eBay for USD 1.5bn and became a subsidiary company, only to spin off from it in 2014. Since then, it has grown to become the become the largest digital payment companies in the world, with more over 173m users, and its market cap is almost USD 50bn. It has also acquired Xoom in 2014.
Transferwise is a relatively recent startup that was established only 5 years ago by two young entrepreneurs, but has a fair chance of becoming the next success story in the world of digital payments and remittances. Since its inception, it has been getting funding of more than $100m by some of the most notable investors out there. These include Richard Branson from Virgin (which also as a money transfer service under their Virgin Money brand), and Peter Thiel – one of the original founders of Paypal. Although Transferwise doesn’t make even close to what Paypal does or has a gigantic client base like it, it is slowly becoming a prominent company in its sub-sector of international payments. It has reported moving more than $500m each month.
Transferwise is authorised as a payment facility by British FCA, while Paypal is approved to operate by the American SEC. The SEC is considered to be a little more astringent, but both are considered the top world regulators for financial institutions. As part of this
To initiate a payment with Transferwise you need to go through a few steps and submit copies of legal documents like your ID, driver’s license, or passport. So before you can send or withdraw any amount, you will go through a screening process. Paypal has a different verification process which is more apt to the fact people use it to send relatively low amounts – you only need to supply relevant information about yourself and link it to your bank account.
Both companies are extremely reliable. They have never been suspected of deceiving clients in any way, and considering how immense they are, and the number of people working for them (Paypal have more than 15,000 employees worldwide, and Transferwise has more than 600), together with the supervision they constantly have from regulators, both should be deemed as safe to use.
2) Supported countries
Both companies allow you to send money to and from almost any country in the world. So as long as you have internet access, you can make payments quickly and easily.
Total number of countries supported by TransferWise: 55
Total number of countries supported by PayPal: 202
Antigua and Barbuda
Bosnia and Herzegovina
British Virgin Islands
Democratic Republic of the Congo
Federated States of Micronesia
Papua New Guinea
Republic of the Congo
Saint Kitts and Nevis
Saint Pierre and Miquelon
Saint Vincent and the Grenadines
Sao Tome and Principe
Svalbard and Jan Mayen
Trinidad and Tobago
Turks and Caicos
United Arab Emirates
Wallis and Futuna
Paypal has significantly higher reach than Transferwise, but Transferwise are covering the most popular regions where our readers come from, and the most popular currency pairs, so for most people that wouldn’t make a huge difference.
3) Mobile Apps
Advancement in technology has allowed for smartphones to get cheaper and cheaper. This is why the number of smartphone users worldwide is set to grow exponentially from the 2.6 billion users recorded in 2014 to 6.1 billion by 2020. And even though the numbers in Europe and America have been levelling in the last few years, the African countries are contributing a lot to this growth. Having a mobile app to make money transfers is very convenient, and both companies have developed very nice and straight forward smartphone apps for their users. Among the top rated in the industry
Here is a side by side comparison of the Transferwise mobile application and the Paypal mobile application in terms of functionality.
|Topic||Transferwise app||Paypal app|
|Send Money Abroad||Yes||Yes|
|Send Money – Same Currency||No||Yes|
|Withhold Funds Without Withdrawing||No||Yes|
|Know Exact Amount Recipient Receives||Yes||No|
|Payment Fee||No ($2 below $400)||No|
|Recipient Fee||No||Yes – a whopping 2.9%|
|Foreign Exchange Fees||Yes, 0.5% – 1.5%||Yes, 3.9% or more|
|Pay without registering||No||Sort of (Available with some merchants, not through app)|
As you can see, the apps have very different functions.
Paypal app is rated 4 / 5 stars by Android users, with more than 410,000 reviews and 10,000,000 – 50,000,000 installs, making it perhaps the most downloaded financial app in the world.
Transferwise, being much newer and more niche, is ranked by only 10,000 reviewers with a rating of 4.5 / 5. It was download 500,000 – 1,000,000 times.
Conclusions: Both are good apps. Paypal is far more popular and far more comprehensive, but Transferwise shows an obvious advantage in fees.
TransferWise: iOS and Android
PayPal: iOS and Android
Transferwise is not the fastest way of moving money abroad because of long compliance. If you are in the UK or in Europe you can be automatically approved by the system by simply supplying the relevant photocopies of your documents even in the same day, but for clients from other regions, the on-boarding process can be longer (still less than with companies like Moneycorp).
With Paypal, the on-boarding process can also take a short period before you are able to withdraw funds into your bank account, but opening a new accounting and sending money abroad can be quite instantaneously. Many people are using PayPal because receipt of money sent internally (PayPal account to PayPal account) is instant. But if the recipient wants to withdraw that money, he needs to wait 2-3 business days to have it in his account or be able to get it at an ATM. So if you need cash, the waiting time is pretty much the same for both companies.
Bottom line: Paypal is quicker to send money abroad, but if you receive money through it, it can take a few days to clear.
The most important chapter for everyone is related to fees and how much is going to cost you per transfer. So let’s take a look:
- The core of its business and the main goal is to make money transfers easy, cheap and transparent. This way, you can see and know how much you are going to send, how much it is going to cost you and how much the recipient will get in the end. +1
- The transfer fee is on average only 1%. For certain destinations, it is only 0.5% and for others, it can be as much as 1.5%. Fixed fees: $2 for small transfer below the $400 mark. +1
- There is no currency exchange fee, thanks to its P2P money transfer system. +1
- TransferWise always provides a better exchange rate than any local bank. +1
- Receive money from a domestic bank account, so no recipient wire fees. +1
- Fund transfer through a domestic wire or a debit card. +1
- There are costs that you are not informed of before or after making the transfer. You can’t clearly see how much you are paying for your transfer. -1
- Geared towards debit card payments only (or, if you have available funds in your account, you can use them). -1
- A recipient should pay 3.4% of the funds received by him. -1
- The foreign exchange fees, in addition to recipient fees, are 3.9% to 4.9%. -1
- It has a fee that you are not aware of (unless you research beforehand) of real the currency exchange. -1
- The exchange rates are pretty bad to a level they are worse than the High Street banks! -1
Conclusions – costs:
This is the area that matters most and Transferwise absolutely dominates it. Although Paypal could be quick, easy and reliable just as much as Transferwise and even more, its payment costs are unbelievably high, and it is quite impossible to know how much money your recipient will receive, which makes it a TERRIBLE means of payment abroad.
Overall conclusion on TransferWise vs PayPal
Both companies serve a purpose and they are used by many every day, but if we are referring to the benefits of sending money to a bank account, TransferWise wins because of its business model and low fees (of which there are few). And if you need to make regular monthly payments, TransferWise will save you a lot of money.
PayPal remains a good option for those that want to pay for things on the internet like buying a domain, subscribing to a web-hosting service, or buying any small-value products or services.
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