This might seem like an odd topic for a boardgames blog, but today I’d like to talk about making payments to people who live overseas. If you ever decide to begin publishing boardgames though, this will become immediately relevant.
We have had to make many payments overseas since we work with people and companies from all over the world. We have worked with artists from Malaysia and Bulgaria, programmers from Kazakhstan and India, voice artists from South Africa and the USA, not to mention manufacturers who, for most boardgames companies, are based in China.
It’s not until you have to make your first payment overseas that you realise it isn’t as straightforward as you might think. There are many different ways to do it and it can cost you an arm and a leg if you don’t do your homework. So let me share some of my findings with you. You might find them useful one day…
Currency Conversion Fees
The first thing to realise about sending money overseas is that it will nearly always need to be converted into a different currency. Almost every financial institution in the world will charge you for this (but see below for an ingenious exception). It’s one of the ways in which they make money. The rates for buying and selling a particular currency are always slightly different and this difference is never in your favour.
So for nearly all of the payment options listed below, you will have to pay a currency conversion fee on top of any other fees they charge you. This might be a flat fee of £2 – £3 or it might be a percentage fee, say 3% – 4%, but this can vary so be careful.
Originally, the only way to pay someone overseas (without physically sending them cash) was effectively to send the money from your bank to their bank via a form of international bank transfer. This was very expensive to do. Mainly because your bank charged you for the service and the bank in the other country charged your bank for receiving the money. I’m not quite sure how they get away with that: “We won’t take your money unless you pay us!”
Prices have come down significantly since the early days, but compared with all the other payment options, paying via your bank is usually a bad idea. Depending on how you do it, the fee could be £20 – £40, which makes it very expensive unless you’re transferring a lot of money.
One way to find and employ people from around the world (which has advantages and disadvantages) is to use a website like Upwork. I have spoken about Upwork before (and highly recommend it), but one advantage of Upwork is that they handle the payments for you.
You can set up a debit or credit card with them and each time an employee needs to be paid, they charge your card and then pay the employee on your behalf in their local currency. There is a 2.75% fee for this at your end. However, the cut is much more severe at the employees end: up to 20% depending on the amount of money involved!
Of course, most people have PayPal accounts these days so if you have hired someone privately, you can pay them using PayPal. The waters become decidedly murky here though. If you are just sending money to a friend overseas, it is usually cheaper. If you are paying someone for their services though, it is more expensive.
Now you could just say you are transferring money to a friend even if you are actually paying for services (PayPal has no way of finding out), but if you are paying for services you get the PayPal guarantee, which essentially means that if they don’t deliver, you have a means to try to claim your money back. This guarantee is often worth the extra fee so many people will pay for it.
Fees include the “paying for services (and a guarantee)” fee, cross-border fees (for the money going abroad), credit/debit card fees (if you don’t pay with your PayPal balance) and the obligatory currency conversion fee. Again, these fees can be a mix of flat fees and percentages so it’s very hard to figure out beforehand exactly how much it will cost you, but 5% is a good ball-park figure. It’s not cheap.
This is the ingenious solution I mentioned earlier. I have used TransferWise many times and will always pay this way if I can. This relies on many transfers being requested in any given country at any given time (a reasonable assumption with populations in the millions).
Imagine you (living in the UK) want to transfer £100 to Hank, who lives in the USA. At the same time, Taylor (who also lives in the USA) wants to transfer the equivalent of £100 (about $130) to her friend Sarah, who lives in the UK like you. You pay WeTransfer £100 in the UK and Taylor pays $130 to WeTransfer in the USA. Then WeTransfer takes your £100 in the UK and pays it to Sarah (in the UK), while simultaneously taking Taylor’s $130 and paying it to Hank.
The net result is that you have paid £100 and Hank has received $130, but no money ever left either country. WeTransfer does some jiggery pokery with multiple payments if the numbers don’t match exactly (which they obviously won’t, most of the time), but essentially the principle is the same. Clever, huh? They still charge a fee, but it is typically less than 1%.
There is one method that is potentially cheaper still than TransferWise, which is to use Bitcoin, or some other crypto-currency. There are downsides to this though, not least of which is that both you and the person you are paying need to have a Bitcoin wallet (and know how to use it!). Most people don’t.
The actual fee for transferring money between Bitcoin accounts is virtually zero. The problem comes when you want to convert between Bitcoin and any other currency. You have all the usual currency conversion fees when depositing money into your Bitcoin wallet or removing it again. Until it becomes more common, it is usually more trouble than it’s worth.
Have you ever had to transfer money overseas? Are there any other methods that you would recommend?