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Payment Methods for International Freelancers

greentooth
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birb greentooth
Hey guys! I've been researching payment methods for people like me who are considered "international" freelancers by most clients and companies for living outside the US, UK and EU sphere. I'd love to hear your thoughts on these services and additional alternatives.

Because fintechs expand their operations every day I'm not getting overly specific regarding countries coverage. It makes more sense to focus on service providers catering specifically to people in need of international transfers instead.

Index
PayPal
Payoneer
Transferwise
Local Bank SWIFT/BIC IBAN

Table: Services Cost Comparision

→ PayPal

Pros 
Well established to the point of omnipresence, fairly straightforward to use making it the usual to-go for small payouts.
Cons
High fees. Depending on where you live you'll be paying nearly 10% to receive a payment. Their currency conversion rates are sub-optimal.
Also depending on where you and your client live there may be restrictions on taking credit card payments from guest users.

Personal experience: Poor international customer support service relying on inadequate canned responses. The local customer service though was actually great.
Also poor UX, with incorrect error messages and interface switching to different pages at inappropriate times such as changing to a personal account creation form (without warning and clear identification) in the midst of a business account creation process. Error-inducing? Absolutely.

→ Payoneer

Pros
Friendlier fees. Around 0-3% for transaction + ~2% for currency conversions.
Acceptable currency conversion rates.
Accepts credit card payments from guest users.
Offers local US/UK/EU bank receiving accounts when being paid by companies and ACH in the US.
Cons
Wirecard links. They vouched for their card operations, and withdrawing to a local bank shouldn't be affected by this, but you never know.

Has a minimum withdraw to bank amount. It's unclear whether it's a standard amount or personalized. It seems to usually be $50, though some people complained it was briefly bumped to $100 last year.

Opening an account is free, but you'll be charged a fee (value nowhere to be found in their terms!) if you don't complete any transactions/use their card for an year.

Support isn't great, but isn't the worst ever. They'll reply all new support tickets with an automated message pointing to an FAQ entry, but they'll clearly label the message as automatic. The bad: They'll mark the ticked as "Resolved". The good: It's not closed. Most automatic messages ask you to reply the auto-message so you can get to an actual human.

I don't know if it's an outlier due the current situation, but in my personal experience payments seem to be taking longer than usual to be confirmed. A recent payment which should have been confirmed within 2 business days is expected to take 6 days. No reason given. For the first 4 days I didn't even get an email acknowledging its existence, it just showed up in my account as pending. Not optimal if you receive by milestone.

Notes
Minor issue 99.9% of you will never face: Their local bank account form has a character limit for names. I have a long name. While most banks safely abbreviate it a few don't. You can guess what happened when I tried to register a new bank account that doesn't.


→ Transferwise

(Multi-currency / Borderless Account)

Pros 
Low fees. 0 to receive + 1.2x% for conversion + ?? small fee to withdraw to local bank (Not sure about these numbers yet)
Acceptable currency conversion rates.
Offers local bank UK/US details + EU SWIFT/BIC IBAN without extra requirements.
Handy fee and conversion calculator.
Cons
£16 one-time fee to get local bank details when opening a business account.
Byzantine FAQs. I tried the version of their site geared towards my country after failing to find the exact info I needed in the international one but it's incomplete, with some links from the top nav menu randomly leading to the international and GB sites.

Notes
As soon you need to learn something outside the most common usages it's harder to find the information you need. Are business accounts available in my region? Is Transferwise compatible with my local bank accounts? Who knows? Should be, but attempting actual transactions seems to be the only way to find out. For this reason I have not tried their services yet, but I expect to do so in the future.

→ Local Bank SWIFT/BIC IBAN

Requirements, costs and ease of use vary according to your bank. They can be competitive, but be wary of hidden requirements and fees.




→ SERVICES COSTS COMPARISON

This table uses data extracted from real simultaneous transactions on PayPal and Payoneer + simulated on Transferwise's live calculator.
Use it to get a general idea of each service's costs since actual fees are determined by where you live and your currency.

Date: 03-08-20
Reuters Mid-Market Exchange Rate (USD → my local currency): 5.32050

  PayPal Payoneer Transferwise
  Transfer ACH / Local Transfer Credit Card Wire ACH Credit Card

Transfer fees
(USD international)

6.40% 1% 3% 0 0 0
Fixed fee $0.3 0 0 $7.63 $2.29 $2.29
Conversion fee 3.5% 2% 2% 1.28% 1.63%  5.27%
Exchange rate            
    USD → local currency 5.09291  5.214 - 5.32050 - -
    % of mid-market (higher is better) 95.72% 97.99% - 100% - -
             
Effective Conversion Fee 7.62%

 3.96%

- $7.63 + 1.28% $2.29 + 1.63% $2.29 + 5.27%
Effective Total $0.3 + 13.5%  4.92% 6.84% $7.63 + 1.28% $2.29 + 1.63% $2.29 + 5.27%

Please keep in mind I still didn't get around using Transferwise, so I can't be sure those are the actual costs involved; Also, this table doesn't take into account the associated bank fees clients will pay on their end.

Replies

  • Biomag
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    Biomag sublime tool
    Regarding paypal - I have had bad experiences. I got several mails from a German law firm representing paypal threatening to sue me for unpaid paypal services. Thing was I had my account locked about 8 years prior in the early 2000s after paypal demanded to send them a scan of my passport to confirm my identity. I didn't trust that whole thing and as I've only used their service once maybe twice I didn't care about them locking the account. So when their lawyer sent me those threats I was certain that there couldn't be any open/unpaid bills. I thought maybe my old account was somehow hacked so I called to the law firm and asked for the details of those supposedly open claims, but they refused to answer. The whole thing made me suspicious and I googled a bit to find several people complaining about such cases. They never contacted me again nor did the threatened lawsuit follow after I wrote them an email demanding the details of the claimed transactions and warning them that I would make a police report for attempted fraud should they again make any demands without proof of any kind of service. 


    On the other hand I've been using Transferwise for their conversion rates to transfer money between my Polish bank account and my Austrian in the last 2 years. Its simple, reliable, fast and far cheaper than any conversion rate I've seen from a bank. Since my account details are handled by my lcoal banks there is nothing specific about it. You just need to register with Transferwise to have a user account.
  • birb
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    birb greentooth
    @Biomag This sounds like a data breach. Some companies only admit they suffered leaks many months or years after the fact and won't even bother to email the affected customers to let them know. This sounds very in line with the overall customer support offered by PayPal.

    And thanks for sharing your experience with Transferwise! It makes me even eager to try it out in the near future. I'd be doing a different use—replacing a real international (for me) bank account with theirs—but it's nice to hear they're reliable. Although it's a bit hard to figure out the exact process one has to go through to achieve this, their openness about fees and conversion rates is refreshing!


  • Biomag
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    Biomag sublime tool
    Yeah, overall paypal isn't striking me as a very secure service. Being that big I guess they attracted a lot of attention and became a target.


    It would be great if you later could share your experience with Transferwise using their accounts. For money transfers they have a very good repuation. Would be interesting to see if they can match it with their accounts :)
  • Eric Chadwick
    My last overseas freelance contract, I built the transfer costs into my fees, and gave my client a few options to choose from. They ended up preferring to use direct bank wire, though on occasion they used PayPal since it was easier for one-offs. Regardless, they absorbed the fees.
  • birb
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    birb greentooth
    @Biomag Although it might not be so soon because each client has their preferred method I'll definitely update that post when I get the chance to test it!

    @Eric Chadwick Did you vary the fees and noted the reason or used a single value which reasonably covered the costs of any payment method?

    I also take the costs into account when coming up with rates, but I calculate an average and mention my preferred method to avoid making it needlessly complicated. Then I invariably end up wanting to kick myself in the teeth as they choose the worst one. :#
  • Eric Chadwick
    I clarified the cost to them of choosing each method, educated and unobfuscated. Not easy in the case of PayPal. I let them know my rate is independent of the delivery method... I need to be paid my rate regardless. They understand this intuitively as businessmen, so it wasn't difficult. And they appreciated my legwork in solving this for them.
  • birb
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    birb greentooth
    I added a costs comparison table to the first post. It uses data extracted from simultaneous real transactions on PayPal and Payoneer + simulated on Transferwise's live calculator. It should be used to get only a general idea of costs involved since they'll vary by region and currency.

    Unsurprisingly, the key takeaway is: Run from PayPal. =)

    Also updated Payoneer's entry with extra data. Changelog:

    Cons

    Has a minimum withdraw to bank amount. It's unclear whether it's a standard amount or personalized. It seems to usually be $50, though some people complained it was briefly bumped to $100 last year.

    Opening an account is free, but you'll be charged a fee (value nowhere to be found in their terms!) if you don't complete any transactions/use their card for an year.

    Support isn't great, but isn't the worst ever. They'll reply all new support tickets with an automated message pointing to an FAQ entry, but they'll clearly label the message as automatic. The bad: They'll mark the ticked as "Resolved". The good: It's not closed. Most automatic messages ask you to reply the auto-message so you can get to an actual human.

    Note

    Minor issue 99.9% of you will never face: Their local bank account form has a character limit for names. I have a long name. While most banks safely abbreviate it a few don't. You can guess what happened when I tried to register a new bank account that doesn't.


  • joaokalva
    Great post, I have began struggling with this lately as well, and indeed paypal is one to run away from. 
    What is your currency for the sake of context? I suspect it might be the same as mine (BRL), which had very similiar rates at the time you've published that table.  
  • birb
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    birb greentooth
    @joaokalva Spot on guess! ;)

    I didn't mention it in cons because it's highly specific to our currency, but in our case there's the additional one of PayPal's mandatory currency conversion, so yeah, it's highly unfavorable for us. I started to do what Eric did and clarify for clients how much it costs to use each processor instead of estimating a single fee and absorbing the difference in cost because PayPal's rate is way higher than the others' rates.
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