Australians lose $2.14 billion a year in currency exchange — now TransferWise's new debit card promises to slash overseas fees by a tenth

• London-headquartered currency exchange platform TransferWise has launched a new debit Mastercard in Australia and New Zealand that promises to be 11 times cheaper on average than other providers.

• The card allows users to spend their money overseas, converting currencies instantly without any of the hidden fees that other providers normally charge.

• Australia and New Zealand are the latest countries to receive the card after it was rolled out in the UK in 2018 and the US earlier this year.

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You'd think that the Australian love of overseas travel would mean we'd have figured out how to transfer money.

Unfortunately, our long-running oligopoly of four big banks -- the main foreign exchange providers -- has prevented any real competition in the space.

Until now, perhaps.

On Thursday, London-headquartered currency exchange platform Transferwise launched its new debit MasterCard in Australia and New Zealand and it promises to be 11 times cheaper on average than its competitors.

“We’ve made it incredibly cheap and transparent to spend money internationally with our card, even if you don't have the right currency," co-founder and CEO Kristo Käärmann said in a statement announcing the card.

So how does is it any different to using your normal bank card overseas?

Well, the problem is banks typically charge a whole range of hidden fees that Australians aren't always aware of -- $2.14 billion each year according to TransferWise's analysis.

"That figure is so high in Australia obviously because the market here is very concentrated, and it's only now, of course, that we're seeing competition coming into the market, whether it's TransfersWise, or other FinTech operating in this space," TransferWise Australia country manager Nicholas Lembo told Business Insider Australia.

That's because TransferWise's model works a little differently to its competition.

READ MORE: Inside TransferWise: the London startup becoming a global giant

Traditional FX services swap your dollars directly and charge you a fee for the service. TransferWise devised an online system where people sending money abroad could swap it directly with others sending money in the opposite direction — a peer-to-peer money transfer system that enables it to cut out high transaction fees.

The borderless transaction card launched on Thursday is an extension of that system and follows its launch in the UK in 2018and the US a few months ago.

"You verify your identity online and we'll send you the card in the post for free. Then you just have to activate it, top it up and away you go," Lembo said.

"You can then choose to either convert it all at once into various currencies you plan on using or you can keep it in Australian dollars. Each time you spend money overseas the card will just do its own conversion in the background from the cheapest combination of currencies that you have on your balance," he added.

The only difference in terms of what it costs customers will be determined by what the exchange rate is at the time of the transaction.

With TransferWise promising a superior rate to its competitors, and no hidden fees, that could save Aussies some serious cash. The following figures indicate how the card weighs up next to other Australian FX providers converting money from Australian dollars to Euros.

In this example, someone spends $5,000 in Europe directly and withdraws $2,500 more in five transactions. You would expect to save at least $154 and as much as $294 compared to other Australian providers.

Surely that could be better spent on the important things in life. Like pasta and Aperol Spritz.