Stablecoin Payroll: The Smart Choice for International Contractors

Nov 21, 2023

Nov 21, 2023

Remote work, emerging as a necessity, has become a surprise benefit for businesses. Now, it is common for employers to hire international contractors and freelancers from all over the globe. However, have they considered the hefty fees associated with international payments?

Traditionally, compensating international contractors entails a complex and costly system of wire transfers. Each transfer not only incurs an outbound fee but often a recipient fee and a multi-day delay. If you employ freelancers, or full-time contractors abroad, it's important to explore better alternatives to this expensive norm.

At Mural, our diverse team is always looks for solutions to this problem. This post aims to do just that: unveil new avenues for compensating international contractors beyond the traditional banking system.

How much do wire transfers cost?

According to Forbes, the average domestic transfer fee across all financial institutions is $25. That only accounts for the outbound fee. Many institutions also bill the recipient a fee; some even charge the sender a second time. This quickly adds up. And remember, these figures pertain only to domestic transfers.

Calculating the average international wire fee is trickier due to variable rates. However, it’s undoubtedly higher. As we explored in our last post about cross-border stablecoin payments, more intermediaries translate to more fees. Each intermediary along the way takes their cut.

A recent study by Bankrate discovered that the average outbound international wire fee is $46. Just the outbound fee! Let's provide some perspective.

For instance, if your company employs 50 workers abroad, and you pay the average amount in transfer fees, those fees alone will cost you $2300 every payroll. If payroll is bi-weekly, that's $4600 a month in unnecessary fees! That doesn't even account for the time and labor costs involved in managing these international wire transfers.

And then there are the currency conversion fees...

Why are international wire transfers so expensive?

We touched on the numerous intermediaries involved in cross-border payments, but there's more to the costs. The primary factors driving the high fees for international wire transfers include:

  • Multiple Intermediaries: International wire transfers usually involve more than just the sending and receiving banks. Correspondent banks, which act as middlemen to facilitate the transfer between banks in different countries, might be involved. Each intermediary typically charges a fee.

  • Currency Conversion: Sending money across borders often involves converting one currency to another. Banks and financial institutions typically add a markup to the exchange rate, earning a profit from the currency conversion. Note: This can be VERY expensive depending on the currency.

  • Operational Costs: Processing international transfers involves manual checks, regulatory compliance, anti-money laundering (AML), and know-your-customer (KYC) procedures, which add to operational costs.

  • Lack of Competition: In many regions, a small number of major banks dominate the market, leading to less competitive pricing.

  • Risk Factors: International transactions have risks, such as currency value fluctuations and potential fraud. Fees are sometimes set higher to compensate for these risks.

  • Regulatory Costs: Complying with international banking regulations can be complex and costly. Banks often pass these costs on to the customer.

  • Profit Margin: Banks and financial institutions have overhead expenses, and they aim to maintain a profit margin. They often incorporate these expenses into the fees they charge for services, including wire transfers.

In recent years, several digital alternatives to traditional payment methods have emerged to challenge the banking industry’s supremacy in cross-border payments. Companies like Wise, Remitly, and Xoom have managed to cut some of these costs, allowing consumers to transfer money internationally at a lower cost than they might find at a bank.

But how much lower? And does it make sense if your company is paying international contractors at scale? Let’s look at some numbers.

How much cheaper are online money transfer services?

Online money transfer services (Wise, Xoom, Remitly, Western Union, MoneyGram, etc.) do tend to offer a cheaper way to send money abroad than banks. Generally speaking, this works because they charge less of a markup on currency conversions, and because they lack the monopolistic power to set prices that many large banks have. They also tend to have simpler, more transparent fee structures than banks.

However, their pricing is not exactly optimal. Unfortunately, a lower markup on currency conversion does not mean no markup, and money transfer services are still subject to the fees associated with intermediaries and regulatory hurdles. In many cases, this is passed to the consumer in two charges: a transaction fee and a (somewhat hidden) currency conversion fee, called a “spread.”

What is a ‘spread’ in cross-border payments?

Most commonly used in gambling, the term “spread” refers to the difference between the real exchange rate and the rate your payment platform offers you.

For example, if you want to send dollars from the United States to Argentina, there are quite a few different exchange rates available to you. You could go with the Argentine government’s “official” rate of 350 to 1, but you would lose a lot of money because the government rate is not even close to keeping up with inflation. At the time of this post, the real exchange rate (what you would get if you exchanged cash on the black market in Buenos Aires) is 725 to 1. So the government effectively collects a massive spread, over half of your money.

But no one goes through the government to convert currencies in Argentina, for obvious reasons. Instead, people often use money transfer services. As we said before, these generally offer better rates than banks but still skim some money off the top for themselves. Noteworthy here is the platform MoneyGram, which advertises zero transfer fees on international payments but has openly admitted that they make their money by charging a spread. Let’s see how that works.

Cross-border payments are cheaper with stablecoins.

The rise of fintech platforms has introduced more cost-effective alternatives to traditional bank-based international wire transfers. These newer methods often slash fees and expedite transfer times by eliminating some of the intermediaries and capitalizing on modern technology for efficiency. When it comes to crossing borders, stablecoin payments are the optimal solution.

Money transfer services might offer a lower spread than banks, but their high processing fees do not serve businesses or individuals engaged in regular transactions well. If you are compensating international contractors, implying regular, cross-border payments, traditional money transfer services might not be the most efficient option. Transitioning to a stablecoin payment system could save you thousands of dollars.

Utilizing a stablecoin payment system like Mural bypasses both the intermediary fees and the currency conversion dilemma. Suppose you send your payment in a stablecoin like USDC, and your recipient also desires USDC. No conversion needs to occur, and since Mural covers the gas fees and charges zero transfer fees, the payment costs you nothing.

However, if your recipient prefers the payment in their local fiat currency, there is a minor conversion required, known as off-ramping. The fee for off-ramping with Mural is 0.5%, which is the most competitive rate for international money transfers in the market.

Mural facilitates your payments without hidden fees, delays, or hassles. Mural’s transparent, user-friendly platform shows you exactly where and how your money moves. Discover why numerous companies have already adopted Mural for cross-border payments.

Conclusion

Transitioning to a modern payroll system like Mural's can revolutionize how you compensate your international contractors – it's instantaneous and significantly more cost-effective. The core benefit of employing a stablecoin payroll system lies in its ability to eliminate the middlemen who traditionally meddle in international transactions, each taking their own cut. International wire transfers involve a multitude of banks, and money transfer services shave off a portion as their 'fee.' By paying your contractors in USDC through Mural, you bypass these additional costs entirely, ensuring a more direct and economical payment process.

Furthermore, Mural simplifies payroll processing. Employers have the convenience to set up recurring batch payments for all their contractors, no matter where they are located. Once you have the wallet addresses of your contractors set up in Mural's system, payments are processed automatically, relieving you from the delays and exorbitant transfer fees. It’s as straightforward as it gets. Discover the ease and economy of stablecoin payments with Mural.

Remote work, emerging as a necessity, has become a surprise benefit for businesses. Now, it is common for employers to hire international contractors and freelancers from all over the globe. However, have they considered the hefty fees associated with international payments?

Traditionally, compensating international contractors entails a complex and costly system of wire transfers. Each transfer not only incurs an outbound fee but often a recipient fee and a multi-day delay. If you employ freelancers, or full-time contractors abroad, it's important to explore better alternatives to this expensive norm.

At Mural, our diverse team is always looks for solutions to this problem. This post aims to do just that: unveil new avenues for compensating international contractors beyond the traditional banking system.

How much do wire transfers cost?

According to Forbes, the average domestic transfer fee across all financial institutions is $25. That only accounts for the outbound fee. Many institutions also bill the recipient a fee; some even charge the sender a second time. This quickly adds up. And remember, these figures pertain only to domestic transfers.

Calculating the average international wire fee is trickier due to variable rates. However, it’s undoubtedly higher. As we explored in our last post about cross-border stablecoin payments, more intermediaries translate to more fees. Each intermediary along the way takes their cut.

A recent study by Bankrate discovered that the average outbound international wire fee is $46. Just the outbound fee! Let's provide some perspective.

For instance, if your company employs 50 workers abroad, and you pay the average amount in transfer fees, those fees alone will cost you $2300 every payroll. If payroll is bi-weekly, that's $4600 a month in unnecessary fees! That doesn't even account for the time and labor costs involved in managing these international wire transfers.

And then there are the currency conversion fees...

Why are international wire transfers so expensive?

We touched on the numerous intermediaries involved in cross-border payments, but there's more to the costs. The primary factors driving the high fees for international wire transfers include:

  • Multiple Intermediaries: International wire transfers usually involve more than just the sending and receiving banks. Correspondent banks, which act as middlemen to facilitate the transfer between banks in different countries, might be involved. Each intermediary typically charges a fee.

  • Currency Conversion: Sending money across borders often involves converting one currency to another. Banks and financial institutions typically add a markup to the exchange rate, earning a profit from the currency conversion. Note: This can be VERY expensive depending on the currency.

  • Operational Costs: Processing international transfers involves manual checks, regulatory compliance, anti-money laundering (AML), and know-your-customer (KYC) procedures, which add to operational costs.

  • Lack of Competition: In many regions, a small number of major banks dominate the market, leading to less competitive pricing.

  • Risk Factors: International transactions have risks, such as currency value fluctuations and potential fraud. Fees are sometimes set higher to compensate for these risks.

  • Regulatory Costs: Complying with international banking regulations can be complex and costly. Banks often pass these costs on to the customer.

  • Profit Margin: Banks and financial institutions have overhead expenses, and they aim to maintain a profit margin. They often incorporate these expenses into the fees they charge for services, including wire transfers.

In recent years, several digital alternatives to traditional payment methods have emerged to challenge the banking industry’s supremacy in cross-border payments. Companies like Wise, Remitly, and Xoom have managed to cut some of these costs, allowing consumers to transfer money internationally at a lower cost than they might find at a bank.

But how much lower? And does it make sense if your company is paying international contractors at scale? Let’s look at some numbers.

How much cheaper are online money transfer services?

Online money transfer services (Wise, Xoom, Remitly, Western Union, MoneyGram, etc.) do tend to offer a cheaper way to send money abroad than banks. Generally speaking, this works because they charge less of a markup on currency conversions, and because they lack the monopolistic power to set prices that many large banks have. They also tend to have simpler, more transparent fee structures than banks.

However, their pricing is not exactly optimal. Unfortunately, a lower markup on currency conversion does not mean no markup, and money transfer services are still subject to the fees associated with intermediaries and regulatory hurdles. In many cases, this is passed to the consumer in two charges: a transaction fee and a (somewhat hidden) currency conversion fee, called a “spread.”

What is a ‘spread’ in cross-border payments?

Most commonly used in gambling, the term “spread” refers to the difference between the real exchange rate and the rate your payment platform offers you.

For example, if you want to send dollars from the United States to Argentina, there are quite a few different exchange rates available to you. You could go with the Argentine government’s “official” rate of 350 to 1, but you would lose a lot of money because the government rate is not even close to keeping up with inflation. At the time of this post, the real exchange rate (what you would get if you exchanged cash on the black market in Buenos Aires) is 725 to 1. So the government effectively collects a massive spread, over half of your money.

But no one goes through the government to convert currencies in Argentina, for obvious reasons. Instead, people often use money transfer services. As we said before, these generally offer better rates than banks but still skim some money off the top for themselves. Noteworthy here is the platform MoneyGram, which advertises zero transfer fees on international payments but has openly admitted that they make their money by charging a spread. Let’s see how that works.

Cross-border payments are cheaper with stablecoins.

The rise of fintech platforms has introduced more cost-effective alternatives to traditional bank-based international wire transfers. These newer methods often slash fees and expedite transfer times by eliminating some of the intermediaries and capitalizing on modern technology for efficiency. When it comes to crossing borders, stablecoin payments are the optimal solution.

Money transfer services might offer a lower spread than banks, but their high processing fees do not serve businesses or individuals engaged in regular transactions well. If you are compensating international contractors, implying regular, cross-border payments, traditional money transfer services might not be the most efficient option. Transitioning to a stablecoin payment system could save you thousands of dollars.

Utilizing a stablecoin payment system like Mural bypasses both the intermediary fees and the currency conversion dilemma. Suppose you send your payment in a stablecoin like USDC, and your recipient also desires USDC. No conversion needs to occur, and since Mural covers the gas fees and charges zero transfer fees, the payment costs you nothing.

However, if your recipient prefers the payment in their local fiat currency, there is a minor conversion required, known as off-ramping. The fee for off-ramping with Mural is 0.5%, which is the most competitive rate for international money transfers in the market.

Mural facilitates your payments without hidden fees, delays, or hassles. Mural’s transparent, user-friendly platform shows you exactly where and how your money moves. Discover why numerous companies have already adopted Mural for cross-border payments.

Conclusion

Transitioning to a modern payroll system like Mural's can revolutionize how you compensate your international contractors – it's instantaneous and significantly more cost-effective. The core benefit of employing a stablecoin payroll system lies in its ability to eliminate the middlemen who traditionally meddle in international transactions, each taking their own cut. International wire transfers involve a multitude of banks, and money transfer services shave off a portion as their 'fee.' By paying your contractors in USDC through Mural, you bypass these additional costs entirely, ensuring a more direct and economical payment process.

Furthermore, Mural simplifies payroll processing. Employers have the convenience to set up recurring batch payments for all their contractors, no matter where they are located. Once you have the wallet addresses of your contractors set up in Mural's system, payments are processed automatically, relieving you from the delays and exorbitant transfer fees. It’s as straightforward as it gets. Discover the ease and economy of stablecoin payments with Mural.