TransferWise vs PayPal Comparison

transferwise vs paypal comparison

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.
  • No hidden fees.
  • Geared towards both small remittances payments and large transfers.
  • Disadvantage: Slightly longer on-boarding process.

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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.

1) Safety

Is TransferWise safe? Is Paypal safe? Are these legit companies or scames? There are genuinely good question, 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.

Background information:

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 entrepreneur, 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 to move more than $500m each month.

Compliance:

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 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.

Conclusions:

Both companies are extremely reliable. They have never been suspected of deceiving clients in any way, and considering how immense they are, and the amount 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

Australia
Austria
Bangladesh
Belgium
Brazil
Bulgaria
Canada
China
Colombia
Croatia
Cyprus
Czech Republick
Denmark
Estonia
Finland
France
Georgia
Germany

Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Italy
Latvia
Liechtenstein
Lithuania
Luxembourg
Malaysia
Malta
Mexico
Morocco
New Zealand
Norway
Pakistan

Philippines
Poland
Portugal
Romania
Russia
Singapore
Slovakia
Slovenia
South Korea
Spain
Sri Lanka
Sweden
Switzerland
Thailand
The Netherlands
Turkey
UAE
UK
USA

 

Total number of countries supported by PayPal: 202

Albania
Algeria
Andorra
Angola
Anguilla
Antigua and Barbuda
Argentina
Armenia
Aruba
Australia
Austria
Azerbaijan Republic
Bahamas
Bahrain
Barbados
Belarus
Belgium
Belize
Benin
Bermuda
Bhutan
Bolivia
Bosnia and Herzegovina
Botswana
Brazil
British Virgin Islands
Brunei
Bulgaria
Burkina Faso
Burundi
Cambodia
Cameroon
Canada
Cape Verde
Cayman Islands
Chad
Chile
China
Colombia
Comoros
Cook Islands
Costa Rica
Cote d’Ivoire
Croatia
Cyprus
Czech Republic
Democratic Republic of the Congo
Denmark
Djibouti
Dominica
Dominican Republic
Ecuador
Egypt
El Salvador
Eritrea
Estonia
Ethiopia
Falkland Islands
Faroe Islands
Federated States of Micronesia
Fiji
Finland
France
French Guiana
French Polynesia
Gabon Republic
Gambia

Georgia
Germany
Gibraltar
Greece
Greenland
Grenada
Guadeloupe
Guatemala
Guinea
Guinea-Bissau
Guyana
Honduras
Hong Kong
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan
Kenya
Kiribati
Kuwait
Kyrgyzstan
Laos
Latvia
Lesotho
Liechtenstein
Lithuania
Luxembourg
Macedonia
Madagascar
Malawi
Malaysia
Maldives
Mali
Malta
Marshall Islands
Martinique
Mauritania
Mauritius
Mayotte
Mexico
Moldova
Monaco
Mongolia
Montenegro
Montserrat
Morocco
Mozambique
Namibia
Nauru
Nepal
Netherlands
Netherlands Antilles
New Caledonia
New Zealand
Nicaragua
Niger
Nigeria
Niue
Norfolk Island
Norway

Oman
Palau
Panama
Papua New Guinea
Paraguay
Peru
Philippines
Pitcairn Islands
Poland
Portugal
Qatar
Republic of the Congo
Reunion
Romania
Russia
Rwanda
Saint Helena
Saint Kitts and Nevis
Saint Lucia
Saint Pierre and Miquelon
Saint Vincent and the Grenadines
Samoa
San Marino
Sao Tome and Principe
Saudi Arabia
Senegal
Serbia
Seychelles
Sierra Leone
Singapore
Slovakia
Slovenia
Solomon Islands
Somalia
South Africa
South Korea
Spain
Sri Lanka
Suriname
Svalbard and Jan Mayen
Swaziland
Sweden
Switzerland
Taiwan
Tajikistan
Tanzania
Thailand
Togo
Tonga
Trinidad and Tobago
Tunisia
Turkmenistan
Turks and Caicos
Tuvalu
Uganda
Ukraine
United Arab Emirates
United Kingdom
United States
Uruguay
Vanuatu
Vatican City
Venezuela
Vietnam
Wallis and Futuna
Yemen
Zambia
Zimbabwe

Conclusions:

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 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 Americas have been leveling 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
Withold Funds Without Withdrawing No Yes
Know Exact Amount Recipient Receives Yes No
Payment Fee No ($2 below $400) No
Recipient Fee No Yes – a whooping 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

 

4) Speed

Transferwise is not the fastest way of moving money abroad because of the 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.

 

5) Costs

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:

TransferWise

  • 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 recepient wire fees. +1
  • Fund transfer through a domestic wire or a debit card. +1

PayPal

  • 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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