For those who do not regularly send money overseas, it can be surprising that in 2025, there can still be high costs and long waiting times. Traditional banks are typically the culprit due to their sluggish legacy systems and old ways of doing things. But with modern fintechs and experienced specialists, they’re more capable of delivering a modern service of international transfers at lower rates. But how can they beat the big guys at their own game?
Table of contents
Trick 1: Treasury management & synthetic settlement
Think about a traditional bank wire. Your money travels electronically across borders, but it actually hops between various correspondent banks that pick up fees along the way. Fintechs cleverly sidestep a lot of this, but it’s not always done in one way – it’s adaptive.
It’s now common to establish local bank accounts holding local currency in the countries they serve. For example, holding Canadian dollars in Canada and Philippine pesos in the Philippines. This local presence opens up a powerful technique: synthetic settlement.
Instead of sending every small transfer individually across borders (like with SWIFT-using banks), they pool incoming funds. Money from multiple customers who send money from Canada to Philippines might be collected in the fintech’s Canadian account. Payouts in the Philippines are then made from their local peso account, and this is funded by previous flows.
So, only larger, less frequent international transfers are used to rebalance these accounts based on the net flow difference. Think of this like running up a tab in a bar.
Trick 2: Efficient conversion & transparency
The actual conversion from one currency to another is a major cost point. Traditional providers use internal calculation methods, but these are opaque and often have hidden buffers or markups. The result is that the recipient gets less foreign currency, or worse, they don’t even know the amount of fees they’ve just handed over.
Legacy financial institutions carry significant overhead because their operations are meaty. Think physical branches and ancient, expensive IT infrastructure. There’s also a mammoth amount of manual effort for compliance checks, in part because of the broad range of operations. Money transfer apps, though, aren’t banks, and so they have less regulation.
Money transfer apps attack this inefficiency by focusing on technology and their large volume of transactions. They manage the currency conversion process far more efficiently and access better conditions through bulk operations. This is in part because they’re specialists unlike high street banks. And, because they’ve entered a race to the bottom price-wise with other money apps. This is all to the benefit of the customer, of course, who manages to get a better rate.
Trick 3: Lean & global operations
Fintechs and money specialists operate on a leaner model. They’ve turned to cloud computing and modern APIs, with extensive automation. Onboarding new customers is slick, and customer support is often lean too (which can be good and bad). But importantly, they serve a wider market, and there are more to choose from.
Let’s take the example of wanting to send money to the Philippines from Canada regularly. A London-based money transfer app may lack Asian expertise, while opening a Singaporean bank may be out of the question legally. But what’s stopping you from using an Asian money transfer app? They will have a local presence and close access to more exotic currencies, meaning a better service.
Sometimes, these companies will open up branches to have a local presence in all global markets, and it’s much more lightweight than if banks tried it. Plus, it’s possible to open many different money transfer apps – the onboarding process is much easier than with a bank, and with fewer rules. Then, you just use the most relevant one for each transfer.
Smarter international transfers systems mean savings
These three strategies ultimately squeeze the costs of international transfers down and transparency up as they fiercely compete. Without as many regulatory hurdles or bloated operations, the crux of the competition is clearer: Only the cheapest and most efficient will survive.
