Neobanks vs FX Brokers

Now, more than ever, people are sending and receiving money from all over the world for one reason or the other. Customers are always in the loop with which medium is best for their transfer transactions. Here, we will compare the Neobanks with FX brokers for international money transfers to decide which one is better. 

What are Neobanks?

Neobank is a digital bank that operates 24/7 and is completely online. Its sole purpose is to process money transfers, digital and mobile financial solutions, money lending, etc. Some businesses have also found a use for this type of bank.

Neobanks don’t have a license, so they usually depend on their bank partners to offer bank-licensed services. 

An advantage of this bank is how easy it is to create an account any time from the comfort of your home (on your mobile phone). Cards given by Neobanks can be used anywhere in the world to perform different transactions including purchases (with the current exchange rate). 

Exchange rates differ from bank to bank (about 1.5% – 0.25% for Revolut, market exchange rate for Wise, a conversion fee of about 1.7% for N26). But we can averagely approximate its exchange between 0% – 2.0% of the market price. 

Most Neobanks use mobile apps that make the transaction even easier and hassle-free. Usually, the apps are user-friendly, fast, easy to understand, and well suited to meet the customer’s needs. Transactions are easily reported banks on the app with updated account balance and transaction history. 

Neobanks are divided into two and it’s advisable to know their differences to utilize them more effectively. There are actual banks and eMoney Institutions. Examples of each are N26 and Revolut respectively. Although both are alike by operating online, and providing an account that allows you to deposit money, make purchases and make transfers; they also have their differences and distinct uses. 

The Banks have the license to provide insurance, pension, and investment accounts, consumer credit, loans, and even mortgages (all the features of a normal face-to-face bank). eMoney Institutions, on the other hand, can only provide payment services. Therefore, if a customer is using a bank such as Revolut, he/she would require a traditional bank to keep his/her money. 

Though, in general, neobanks cannot build interest on savings, they can help manage transfers internationally, and allow bank transactions across different currencies with little to no exchange rate fee.

What are FX Brokers?

FX brokers (also known as foreign exchange brokers or forex brokers) offer money transfer services. They assist a customer in exchanging a currency from one to the other. Although, most people know FX brokers as a medium where customers trade different currencies and earn from the difference in the foreign exchange rate. 

Some people prefer to use this service for money transfer especially when transferring a large sum of money. This is because it is believed that the exchange rates on this medium are more suitable as the amount to be transferred increases. Few examples of FX brokers include OFX, Currency Solutions, Halo Financial, World First, and Currencies Direct. 

The exchange rate also differs from one broker to another like in neo banking. For OFX, their exchange rate could be as low as 0.4% and it gets better with the more money you send. Currency Solutions has no fees for transfers higher than ₤3,000. However, customers can request free quotes on their websites for each currency-to-currency exchange rate. 

Generally though, when it comes to sending a large sum of money abroad, it’s cheaper to use an FX broker. This is because FX brokers tend to offer a better exchange rate for larger amounts for transfer.

Why FX Brokers are Better?

Although, it might seem like neo banking is safer and more reliable, there are more than enough reasons as to why FX brokers are best for international money transfers

Most neobanks have their customer service operate on only weekdays and according to the U.S working hours and because they also have human personnel, it is susceptible to down moments. Revolut, for example, is known for its slow response to customers during emergencies. 

FX brokers on the other hand work entirely without the support of human personnel and so everything in-built is already automated. There have been few to no reports on slack and customer service works 24/7.

And though, they do not offer banking features (such as mortgage nor card privileges), large amounts of money are better transferred on FX brokers. This is because the rates get better the more you transfer. Rates are also negotiable and it differs based on what currency is transferred. 

Conclusion

If you were not sure of which platform to use when processing international money transfers, look no further. For customers who hope to transfer large sums of money in a small period with no stress, the FX broker would stand as the best option for you.  

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