However, the service can be slow, and while the exchange rates and fees levied on these transactions deliver healthy profit margins for the service providers, they represent poor value for the consumer.
A study by the World Bank three years ago highlighted the size of the margins involved. It found that banks charge an average of 12 per cent for low-value transfers, with Western Union charging around 9 per cent.
Fortunately, the marketplace is starting to change. In the last 12 months we’ve seen some enterprising new companies taking on the big boys, with the likes of Azimo and CurrencyFair offering cheaper money transfer alternatives.
Azimo recognised that migrants and UK expats abroad send billions of pounds overseas each year and has developed an online service that enables you to send money to 125 countries worldwide.
The service gives the customer a range of options including payment direct to bank accounts, to mobile phones or for cash collection at more than 150,000 global locations.
The minimum transfer value is £50 and users can send up to £900 without need for ID verification. Lower overheads mean that transfers via Azimo will be charged at between 1 and 2 per cent, compared with existing bank and wire services that frequently charge between 4 and 8 per cent. As a result Azimo claims you could save up to £30 on a £300 transfer.
Another new player in this market is CurrencyFair, an online peer-to-peer marketplace which matches currency exchange demands.
It cuts out the hefty bank margins which mean customers having access to exchange rates at very close to the wholesale rate.
Even though banks often offer “free” international money transfers or 0 per cent commission, the loading on the exchange rate is often a stealth charge and the mechanism used to make a tidy profit on these transactions.
CurrencyFair recently analysed the exchange rate mark-up used for a transfer of £5,000 into euros and found that the big high street banks charged a margin which added between £165 and £235 to the cost of the transaction, whereas the extra cost through their own service was just £30.
These new companies have lower overheads than the bigger players and are able to pass on further cost savings by offering a direct service and cutting out some of the middlemen.
In much the same way that peer to peer lending is starting to nibble away at the savings and borrowing market, these money transfer alternatives will appeal to the growing army of price conscious consumers embracing new technology in order to obtain a cheaper deal.
• Andrew Hagger is a personal finance analyst at Moneycomms.co.uk