How to reduce fees on forex payments

22-year-old Keyur Kumbhare also has a similar story. They were losing around 8% in every payment they received through the platform widely used by businesses for international payments. “I started persuading my customers to sign up with the cross currency money transfer service, which I found the cheapest,” said Kumbhare from Ahmedabad.

Kumbhare is talking about Wise (erstwhile TransferWise). After trying out several options, Wise became the preferred choice for Kumbhare. “PayPal was the first platform I used because it was the most popular but it was expensive. Though direct bank-to-bank transfer was cost-effective, it took 10-12 days for the payment to be released.”

Money transfer tech companies including Wise, Payoneer, PayPal, Winvesta and Salt (an Indian startup) have ensured faster receipt of money from abroad for freelancers as compared to traditional banks. In some cases, bank transfers may do better in terms of cost and security because they do not involve middlemen (see table).

Bank Transfer: SWIFT (Society of Worldwide Interbank Financial TelecommunicationWire) transfer mechanism after which banks can choose the fastest bank-to-bank payment transfer option. There are generally three costs – the sending bank’s commission, the receiving bank’s commission and foreign currency Mark-up fee.

The remitting bank’s commission is usually decided by the paying client, but the client can choose to pass on the full cost or share it with the freelancer. Make sure this doesn’t happen as banks in countries like the US charge a high $40-50.

As far as Receiver Bank’s commission is concerned, most of the big Indian banks like HDFC, ICICI and SBI have done away with it and charge only forex mark-up fee. Some like Axis and Indusland charge a bank 100-500 per transaction for wire transfer. GST is levied by banks on all inward remittances.

21 year old digital marketing freelancer Shivaay Madan prefers bank transfer because of its low cost structure. “In most bank transfers from countries like Singapore and Malaysia, I receive the exact amount generated in my invoice. However, this is not the case with bank transfers from the US or UK.” Businesses in the US and UK prefer PayPal or Stripe over bank transfers due to higher commissions.

In addition to transaction fees, Indian banks charge 100-300 for issuance of one Foreign Inward Remittance Certificate (FIRC) per certificate. One FIRC is to be compulsorily procured by the freelancer for each inward remittance.

Online transfers: PayPal or Stripe are the most popular online options but charge the most (see table). Other new-age money transfer platforms such as Winvesta, Payoneer, Zoom, Wise and Salt, among others, charge a fixed fee of 0.8-2% on the total amount and offer foreign currency conversion at mid-market rates.

Regulations in India do not permit holding of foreign currency in an online wallet or account of an online money transfer platform. The amount remitted should be deposited directly into the recipient’s bank.

Most money transfer platforms enable transactions through a multi-currency virtual bank account (see table).

“We create a virtual bank account in the country where the freelancer’s client is based. The client transfers money locally to your virtual account, which is then transferred to an Indian bank account,” said Pal, co-founder of online money transfer platform Salt. is shipped in.

Swastik Nigam, founder and CEO of Winvesta, said these accounts are used only as pass-through accounts to bring money into India. “The money in these accounts is not kept overnight and there is only one beneficiary in the account, which is your Indian bank account.” When asked whether these accounts qualify as foreign assets, the corporation said, they are not because they No funds “Though not required, the customer can choose to declare the virtual account in the foreign asset schedule in the ITR and mention the balance as nil,” he said.