Category

Money Transfer

Category

PayPal, Revolut, TransferWise and Venmo: Wrapping Your Head around the World of Money Transfer Services

While more and more news articles document how social media has changed our ways of communication, there’s far less content documenting how technology has changed the ways we bank, get paid and pay others. Now that TransferWise has finally launched its debit card in the U.S., let’s compare it with a few of the other money transfer services and see if it’s really worth using (or rather downloading).

What are the money transfer services?

As the name implies, money transfer services exist to help you get money from Person A to Person B. That and the fact that PayPal, Revolut, TransferWise and Venmo each offer debit cards, is about the only major similarity that the four services have in common. The primary factors distinguishing money transfer services are (i) what are you using them for, and (ii) who are you using them to pay.

I already have a bank account. What’s so special about a PayPal/ Revolut/ TransferWise/ Venmo debit card?

Yes. Debit cards offer you the advantage of spending from your account balance without having to wait to transfer funds to your bank account. While this might not be a big deal if you only receive $20 into your Venmo account on a monthly basis, it’s a huge advantage if, for example, you use PayPal for a side hustle and receive $400 or $500 per month into your PayPal account.

Comparison

Without further ado, let’s delve into the world of these services and help you judge which one might be right for you and your situation.

Venmo

Launched back in 2009, PayPal-owned Venmo at times feels more like a social media app than a money transfer service with features like the in-app Friends and Public tabs.

With its mobile-only interface (the Venmo website only allows for account management), Venmo is more or less geared towards exchanging relatively small amounts between family and friends and is not intended for larger financial transactions (e.g. paying for goods and services). And don’t try to use Venmo for making payments to friends North of the Border, as Venmo requires both the payee and recipient to be U.S.-based.

PayPal

Launched in 1998, PayPal is truly the granddaddy of all the money transfer services as it is the only one old enough to walk into a bar and order wings with a side of fries and beer. Jokes aside, PayPal has stellar brand recognition and truly global reach.

PayPal ranks among the most popular money transfer services in dozens of countries and is well suited for e-commerce, allowing buyers and sellers to safely transact through platforms such as eBay and Amazon.

PayPal is also ideal for sending money within the same country without the need to share personal banking details (think Venmo but without the $4,999.99 weekly transaction limit).

That said, PayPal does charge acceptance fees for business payments and has high currency conversion fees when compared with Revolut and TransferWise. PayPal also requires payment methods to match the country of the account (e.g. a U.K. debit card cannot be added to U.S. PayPal account).

TransferWise

Unlike Venmo and PayPal, TransferWise and Revolut take a different approach to transferring money. Venmo and PayPal require both the payee and recipient to have accounts with their respective platform and transactions occur between user accounts. Conversely, instead of transferring funds from user to user, TransferWise and Revolut allow you to transfer funds to bank accounts (and not exclusively to users).

Launched in 2011, TransferWise is particularly well-suited for currency conversion and allows users to simultaneously hold funds in a range of over 40 currencies. In order to maximize savings on international transfers, TransferWise uses a peer-to-peer (P2P) transfer system that results in incredibly low fees and user savings when transferring cash across borders. TransferWise just launched its debit Mastercard in the U.S. and has excellent, U.S.-based customer support.

Revolut

U.K.-based Revolut hasn’t fully launched in the U.S., but it already has a dedicated U.S. website with job openings in New York and San Francisco.

Launched in July 2015, Revolut turns four this month and combines the social payment functions of Venmo with the currency conversion elements of TransferWise. Revolut allows users to hold funds in 29 currencies and operates on a freemium model with Premium and Metal subscription services offering a range of perks such as airport lounge access, disposable virtual cards, and a metal debit card.

Other considerations

Debit Cards

PayPal, Revolut, TransferWise and Venmo certainly know that the best things in life aren’t free, as each has packed potential fees into its respective debit card offering. Venmo and PayPal debit card users can only make free withdrawals at MoneyPass® ATMs in the U.S., otherwise, a $2.50 transaction fee applies (in addition to any additional fees charged at the ATM). Additionally, the Venmo debit card only works with U.S.-based merchants and cannot be used to withdraw money at ATMs abroad.

On the other hand, Revolut and TransferWise are a bit more generous, offering users no foreign transaction fees on debit card purchases and providing customers with limited free monthly ATM withdrawals at cash machines worldwide.

Rewards

Sadly, debit cards offered by money transfer services aren’t analogous to premium credit cards and are a bit light in terms of rewards. But that doesn’t mean there aren’t any perks to be had—Revolut offers 1% cash back when using the Metal card to make payments and PayPal from time to time runs online shopping-related promos that often require just a PayPal account (and not necessarily the PayPal Cash Card too).

Account Insurance

On a final note, it’s important to know the potential risks of using money transfer services and of maintaining balances in PayPal, Revolut, TransferWise, or Venmo. While account balances in Venmo and PayPal are generally not FDIC-insured, in 2018 PayPal began depositing funds from certain account types into custodial accounts at Wells Fargo, making those account balances FDIC-insured. Revolut and TransferWise, on the other hand, stores client funds in accounts at FDIC-insured banks.