As the freelance economy skyrockets, more New Zealanders are working for global clients from home or temporary locations overseas.
Retirees are fast catching up with millennials, looking to keep busy or supplement their pensions.
But there's a catch.
As any business owner with international suppliers or customers will acknowledge, paying or invoicing in foreign currencies can carry a sting in the tail. In 2017, people around the world sent over US$1 trillion across borders.
Astoundingly, while these people made up only 6 per cent of the global market (the other 94 per cent were businesses), they paid 40 per cent of the bank fees. Many aren't aware that banks add a mark-up on each currency conversion.
Whether you use a bank or an alternative like PayPal to transfer money, you'll have to pay an upfront fee. Independent research, conducted by Capital Economics, reveals Kiwis lose around $1 billion to overseas card transaction fees, annual card fees, withdrawals from overseas ATMs and hidden exchange-rate mark-ups every day.
TransferWise is offering fees 11 times cheaper than bank-issued or prepaid cards and a whopping 19 times cheaper than PayPal – not to mention being safer than carrying a lot of cash.
For freelancers – without guaranteed income, holiday pay or other perks – every opportunity to save money matters.
In 2008, Kristo Käärmann, an Estonian expat in London, tried to send his Christmas bonus home. He paid his London bank £15 up front, but when it reached his account in Estonia, the amount was a lot smaller than he expected. He realised that, instead of giving him the rate he saw on Reuters, his bank had marked up the rate by 5 per cent.
That's when he and fellow expat Taavet Hinrikus came up with a solution that turned into a billion-dollar enterprise.
Nearly a decade later, their solution, TransferWise, has launched the free Platinum debit Mastercard to help take the pain out of international money transfers. The first-of-its-kind debit card enables freelancers to get paid "like a local", providing local bank accounts in the US, Eurozone, Australia, New Zealand and the UK, to avoid expensive money transfer fees.
This removes the guesswork around hidden bank charges and mispayments, making it far easier for workers to see exactly what they've been paid for, withdraw money from platforms like UpWork and Freelancer.com and pay expenses in the local currency.
Meanwhile, claiming expenses and invoicing in different currencies can be a logistical nightmare. TransferWise integrates seamlessly with Xero so freelancers can easily keep track of payments and invoice in local currencies, while receiving money with no fees.
The benefits for Kiwi workers are potentially even greater. Given few multinationals are based in New Zealand, New Zealanders often need to visit head offices or do freelance jobs offshore – and of course they share a national addiction to travel.
The ability to pay in the local currency without being penalised by a bank or a local ATM then becomes a real boon. For the jetsetters among us, the account also holds more than 40 currencies so freelancers can work for multiple clients around the world (or travel for themselves) and switch between them with zero transaction fees, simply converting at the best possible exchange rate on the day.
Trusting a new service with your money can always be a bit of a leap of faith. Banks may charge a premium but at least they're safe.
However, fintechs like TransferWise are subject to strict security regulations in every country they operate in, including New Zealand. With six million customers worldwide, transferring more than $5b each month, TransferWise takes security seriously.
Meanwhile, the Platinum debit Mastercard has generated more than 15 million transactions worldwide since it launched in 2018.
As technology continues to remove borders, international payment options such as the borderless account and Platinum debit Mastercard will enable digital nomads to enjoy more in their back pocket. Do your homework on the services you're using, and check the hidden costs – it'll pay dividends in the long run.
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