Best ways to send money to friends and family

Why people send money to friends and family

Money has always moved between friends and family. Sharing bills, money as gifts, financial support for siblings, children and even parents are some of the common reasons.

Before the internet made digital payments possible, people would use cash, cheques, postal orders, telephone banking and international remittances.

These traditional methods posed challenges that don’t necessarily exist today. They could be slow, insecure, unreliable and not accessible to everyone. This would often leave people with no other option aside from sending cash in the post, which remains risky, or physically giving someone the money.

Traditional ways to send money 

As technology and banking services have evolved, people have been able to access more ways to send money. Let’s take a quick look at some of the traditional ways of sending money (that don’t involve stuffing cash into an envelope).

Bank transfers

Before online banking, you’d need to go to a branch or use telephone banking to do a bank transfer. Nowadays, people can do it online using their banking app or their bank’s website, assuming they’re set up for online banking.

Here’s what normally happens when you make an online banking transfer:

• You add a new recipient using their name and account details
• Then you confirm the new recipient
• You bank will ask you to verify the details and in some cases make you wait until you can make a payment
• Once everything is approved, you can set up a one-off or regular payment

Adding a new recipient isn’t necessarily straightforward, especially for foreign payments. Typically, you’ll need to provide their full name, account number, and additional banking details – such as a SWIFT/BIC code or IBAN – depending on the country and their bank’s requirements.

If they bank in a different country, you may need their Society for Worldwide Interbank Financial Telecommunication (SWIFT) code or if they’re in Europe a code used for the Single Euro Payments Area (SEPA), such as Bank Identifier Code (BIC) or International Bank Account Number (IBAN).

Once you’ve added a new recipient for bank transfers, their details are normally saved in your list of recipients, so next time you can select them without entering their details.

Remittance services 

Remittance services used to be a lifeline for people who needed to send money to a friend or family member overseas or receive it. For example, people with relatives in other countries would use services like Western Union or MoneyGram to make regular payments.

These services have evolved and many are fully accessible online. But there was a time when you’d need to take cash, identification and payment details to a remittance counter. Your friend or family member would have to then attend a remittance in their country to get the money.

Online payment platforms 

Online P2P payment platforms like PayPal and Wise have made sending money to family and friends more accessible. By providing  payment gateways and currency conversion services, foreign money transfers are now broadly accessible to most people with an Internet connection.

To use an online payment platform, you’ll need to set up an account, link it to a payment method or bank account and complete a few authentication and verification steps before you can send money to family and friends.

Pros and cons of various payment methods

There are various advantages and disadvantages to each method. Often you’ll find that you need to make a trade-off between convenience and cost, or speed and cost. 

Let’s take a deeper look at how the different methods compare.

What are peer-to-peer (P2P) transfers?

Peer-to-peer (P2P) transfers let two people make a digital payment through an intermediary without the direct involvement of a bank.

You can make P2P payments using local currency or crypto currency. You may see the term ‘fiat’ used when describing payments. This simply refers to non-crypto currency, like £GBP or $USD.

For example, instead of sending money from your bank account to your sister’s bank account, you each use an intermediary service. The intermediary sits between each of your bank accounts.

Popular types of intermediaries include:

• Online payment services like PayPal
• Payment apps
• Digital wallets
• Crypto wallets

Intermediaries need to be linked to your bank account, for example like when you connect your PayPal account to your debit card.

P2P payments can be handy for non-regular payments. These might include shared one-off expenses, bill-splitting, financial emergencies, money lending and gifts. They also tend to be a little quicker, cheaper and more convenient than conventional bank transfers into your account.

This is because the p2p payment bypasses traditional bank processes. You’re not actually moving money from one bank account to another. Instead you’re instructing the intermediary to immediately credit the recipient. The money moves from your account later.

Making P2P payments to recipients in foreign countries can eliminate the need to pay foreign transaction bank fees. Your bank only becomes involved when the money moves from your account to the intermediary. It never actually makes an overseas transaction.

Let’s say you’ve been on holiday with two friends. Each friend lives in a different country to you. One friend paid the bill for dinner last night and you and the other friend promised to settle up later. 

You send your share of the bill to your friend using a payment app and she receives the money in her payment app almost immediately. P2P crypto wallet-to-wallet payments work in a similar way. 

You use your private key and the recipient’s wallet address. The transaction is validated on the blockchain almost instantly by an automated smart contract. There is no bank involved in moving the crypto.

Let’s say you want to send some Bitcoin to a relative in another country. You get his crypto wallet details and enter them when you’re setting up the payment.

You can either copy and paste the recipient’s address into the relevant field or use a QR code to generate their wallet address. Then you follow a few more steps to confirm and validate the details before sending.
Crypto.com users can make P2P payments using the Crypto.com App. The app currently supports crypto-to-crypto and local-to-local payments in select regions, and once you’re set up, you don’t need to add the recipient’s details.

Sending money with Crypto.com 

For the first few times, it may feel different to fiat P2P transfers. Some of the language may be unfamiliar too. Once you’ve done it a few times, you should get used to the process.

Here’s how to do it in four steps:

• Step 1: Log in to the Crypto.com App.
• Step 2: Go to ‘Accounts’ or ‘Wallet’.
• Step 3: Select the crypto you want to send.
• Step 4: Enter recipient’s wallet address.

In the US, Crypto.com currently supports crypto-to-crypto P2P transfers only.

Benefits of using Crypto.com for transfers 

Crypto.com supports both crypto-native and local fiat currency transfers. And using the Crypto.com App for transfers maybe quicker than using your bank or a remittance service. 

This is especially true for overseas payments which can take days with banks or remittance services compared to sending almost instantly with Crypto.com. 

Another advantage is that you can send money at any time of day or night. While most banks allow you to make transfers at any time using online banking, it can take longer for the money to arrive and there may be fees involved. 

Using a remittance service in-person can restrict you to their opening hours. You may find making an online payment with a remittance service can take longer than making a P2P payment with Crypto.com, due to their security processes.

Things to consider before sending money 

Exchange rates

Exchange rates for fiat currency can potentially increase costs when sending money to family and friends if they live overseas. Exchange rates can fluctuate daily, so timing can be important. Especially if you’re sending a large amount of money. 

Let’s take a basic hypothetical example using round numbers for simplicity. This example is for educational purposes only and does not reflect actual market exchange rates. 

Imagine you want to send $1,000 from your home in the United States to a friend in Italy. On the day your friend asks for the money the exchange rate is $1 to €0.90.

If you sent it on that day your $1,000 gets converted to 900 euros. This does not include any fees.

But you had other things to do and had to make the payment the following day. But the exchange rate has changed. The dollar has dropped in value by 5.56% against the euro and it’s now $1 to €0.85. 

If you send $1,000 on day 2, it’ll now convert to €850. So your friend loses €50.

Crypto market volatility

Sending crypto to family and friends doesn’t come with this problem, as there are no currency exchange rates. However, crypto can be quite volatile and its value against the dollar can go up and up and down quite quickly. 

This poses similar challenges to those caused by currency exchange rates. The value of the crypto they receive may be less than the value of the crypto you sent.

Stablecoins*, like Tether and USD Coin, are digital assets typically pegged to the value of a national currency like the U.S. dollar. Because their value is designed to remain stable, they are generally less volatile than other cryptocurrencies. This can offer some protection against price fluctuations when sending crypto to family and friends.

Transaction limits

Transaction limits are relatively common when using intermediaries, remittance services and banks. This  could be  for security reasons, but it may represent an inconvenience for those who need to send large sums quickly.

One option is to split one large payment into a few smaller payments, but this can make the total amount of fees higher, as fees can be charged per transaction rather than as a percentage of the amount you’re sending. You’re less likely to encounter transaction limits on payments when sending crypto.

Checking details

With fiat payments, you may need to enter a lot of details, including things like account number, sort code, IBAN and possibly other information too. When sending overseas you’ll generally need more details to make the transaction.

While banks have a range of processes to prevent or at least discourage you from sending money to the wrong account or person, it’s down to you to check if the details are right. It can be difficult to recover money that you’ve sent to the wrong person. 

Crypto payments can sometimes require less admin on this front. Because crypto users are able to share their wallet address, it can be less time consuming to enter their details. Although this doesn’t mean you shouldn’t double-check.

Tips for choosing the best payment method 

The best method when you want to send money to friends and family depends on a few things, including:

• Currency
• Location
• Amount
• Fiat or crypto preference

If you’re sending local currency to someone in the same country as you, you could use your bank, or a payment app. Using a remittance service would involve paying unnecessary fees. Although most banks wouldn’t charge a fee for sending local currency, always check.

If the person you’re sending to uses crypto, this can be a good way to make the payment quickly, securely and without any foreign transaction fees. In most cases, you can complete the payment without transaction limits or fees using an app.

If you’re sending fiat money overseas, it’s likely you’ll face at least some fees. The number of fees and their total amount will vary according to the method you use. For example, your bank might charge you a foreign transaction fee and charge the recipient a currency conversion fee which they deduct from what they receive.

Regardless of which method you choose, make sure the service you use is trusted and safe. For crypto payments, go for an established platform like Crypto.com which is highly regulated.

Steps to start sending crypto in minutes

1. Sign up with Crypto.com in minutes.
2. Fund your account via free bank transfer, card, Apple Pay, or Google Pay.
3. Go to the 'Transfer' section in the App to send money instantly.
4. Enjoy seamless global payments with friends and family.

Benefits and risks of payment apps 

Compared to using traditional bank accounts, payment apps offer a relatively attractive trade-off for people interested in an alternative way to send smaller amounts of money. Customers aren’t protected in the same ways as they are with banks, although many payment apps do offer some protections, but they generally benefit from increased speed, digital-first experience and convenience. 

Concerns around fraud and scams are legitimate. Scammers and fraudsters like the fact that payment apps don’t have the same powers as banks to protect against fraud and recover stolen money. But with greater awareness and education around the risks and warning signs, users should be better equipped to protect themselves.

For crypto payment app users, the key advantages include privacy, speed and convenience. This comes at the expense of stability however. Crypto is significantly more volatile than fiat currencies and can increase and decrease in value suddenly.

Important information: This is informational content sponsored by Crypto.com and should not be considered as investment advice. Trading cryptocurrencies carries risks, such as price volatility and market risks. Before deciding to trade cryptocurrencies, consider your risk appetite. Services, features and other benefits referenced in this article may be subject to eligibility requirements, token holdings, and may change at the discretion of Crypto.com. 

P2P Send features vary by region and are available only in select markets . Free transfers apply between Crypto.com users only; other transaction fees may still apply.

Third-party information subject to change.

* Although the term 'stablecoin' is commonly used, there is no guarantee that the asset will maintain a stable value in relation to the value of the reference asset when traded on secondary markets or that the reserve of assets, if there is one, will be adequate to satisfy all redemptions.