How do these e-wallets secure their exchange rates? Are there risks in using them?

The rising popularity of multi-currency mobile wallets particularly among travellers can be attributed to the convenience they offer such as more favourable exchange rates compared to traditional banks or money changers.

Using credit cards overseas often incurs a foreign transaction fee ranging from 2% to 3%, making these wallets an attractive option for many consumers.

Revolut and YouTrip, in particular, have witnessed significant growth in user numbers. However, both companies have opted not to disclose specific user figures.

As Singapore gears up for year-end travel, examining these popular multi-currency wallets—Revolut, Wise, and YouTrip—becomes more important.

How Do These Apps Operate?

YouTrip, Wise, and Revolut enable users to hold various currencies within their platforms.

For example, a user in Singapore can store Singapore dollars and exchange them for US dollars within the app.

Both Revolut and Wise have a fee per currency conversion. If a user runs out of a specific currency for a transaction, other currencies within the wallet will be converted to facilitate the payment.

While Wise can accommodate up to 40 currencies and Revolut and YouTrip support 33 and 10 currencies respectively, users can transact in more than 150 currencies, with real-time conversions.

The Monetary Authority of Singapore (MAS) regulates these platforms, setting a wallet limit of S$5,000, slated to increase to S$20,000 by year-end.

Users can send money to friends, and make withdrawals at overseas ATMs, with each company offering varying free withdrawal allowances before fees apply.

While YouTrip doesn’t permit transfers from the wallet to a bank account, both Wise and Revolut offer this feature.

Competitive Exchange Rates

The competitive advantage of multi-currency apps stems from high transaction volumes and more efficient operations.

Caecilia Chu, CEO of YouTrip, highlighted their improved foreign exchange rates over time, attributing this to increased transaction volumes. Ashley Thomas, from Revolut Singapore, emphasised their mobile-centric approach, lowering operational costs and offering users optimal pricing.

“Those payment apps earn money from merchants and through investing customer funds, not the currency exchange fees,” said Dr. Wang Xin, an assistant professor from Nanyang Technological University.

Can Banks Compete?

Despite offering multi-currency accounts without foreign transaction fees, banks often fall short on exchange rates.

While banks possess access to wholesale currency markets, their overheads and diverse business interests can limit their ability to negotiate favourable rates.

“While banks can also access these (wholesale currency) markets, their higher overhead and diverse business interests may hinder their ability to negotiate favourable rates as effectively,” shared Lee Yen Teik, a senior lecturer of finance at the National University of Singapore (NUS).

“Even without explicit fees, banks may still apply markups to their exchange rates, effectively increasing the cost for customers.”

While banks may provide slightly higher security than e-wallets, experts assert that cybersecurity risks exist in both options.

Tan from Singapore Polytechnic advised users to practise cyber hygiene and avoid keeping excess funds within e-wallets.

Despite the rise of e-wallets, traditional moneychangers continue to serve a role, particularly in facilitating small cash transactions, personalised face-to-face service, and the tangible experience of exchanging physical currency.
That said, experts urge these entities to embrace technology to stay relevant in an increasingly digital landscape.

More from OMY: The Ultimate Guide to Using YouTrip Card in Singapore – Everything You Need to Know

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