Canadians send significant amounts of money to recipients in other countries. According to a Statistics Canada study, one-third of newly landed immigrants each transmit an average of $1,450 annually to relatives or friends living outside Canada.

Now, Canadians have a new way to transfer money abroad. PayPal has launched a social payment app that enables Canucks to easily move funds within Canada or abroad via their Facebook accounts.

The PayPal innovation is aptly called Send Money. But is the new app better than other common ways to transfer cash? CreditCards.ca investigates.  

How it works
Senders must have both a Facebook account and a PayPal account, but can transmit cash to anyone with an email address. Recipients receive PayPal sign-up instructions with their email notification, which helps should they need to set up an account for accessing delivered funds.

Facebook-originated money transfers can be embellished with a wide range of colourful e-cards. Senders can also attach photos, YouTube videos and recorded webcam clips.

The price is right
For Send Money transactions funded from the originator's bank account or PayPal balance, no fee is charged when money is forwarded to friends or family located in the United States.

However, if the U.S.-destined funds come from a credit card account, the sender pays a 2.9 per cent fee plus 30 cents. Transferring $1,000 from a credit card to a favourite nephew in Texas would cost the originator $29.30 in fees.

To transfer cash from Canada to a country other than America, each Send Money transaction costs:

• 0.5 to 2 per cent, for money sourced from a bank account or PayPal balance.
• 3.4 to 3.9 per cent plus 30 cents, for money charged to a credit or debit card.

The percentage rate payable depends on which country the recipient lives in. Assuming that the Philippines are subject to the highest rates, a Filipino-Canadian who transmits $1,000 to his mother in Manila would pay:

• $20 for withdrawals from his bank account or PayPal balance.
• $39.30 for a credit or debit card transaction.

Regardless of origin or destination, PayPal defaults to U.S. currency. This means that there will be additional currency exchange costs when funds are translated into local currencies.

Another potential disadvantage for Facebook money transfers is that recipients in some developing countries may lack the computer access needed to move funds into and out of PayPal.

Western Union online money transfers
Western Union is an established and well-known money transfer service, with hundreds of thousands of agent locations globally. CreditCards.ca contacted a Western Union service rep through the company's web chat service and was quoted a $50 fee for an online transmission of $1,000 to the Philippines.

That fee rises to $72 for credit card-funded transfers, according to Western Union's online fee calculator. Recipients can pick up delivered funds at any Western Union location in their area, after money is sent electronically via Western Union's Money in Minutes service.

Like their transaction fees, Western Union exchange rates appear to be higher than what PayPal charges for Send Money transactions.

Canadian bank wire transfers
Savings or chequing accountholders can use their bank's wire transfer service to send money. Canada's largest financial institution, the Royal Bank, charges $12.50 to transmit up to $2,500. Surprisingly, the U.S. is excluded from the 120 destination countries eligible for Royal Bank's deeply discounted fee. TD Canada Trust charges a flat $30 to transfer up to $10,000 globally, including the United States.

Both Royal Bank and TD restrict their wire transfer services to clients enrolled in online banking, who must also furnish details about both the recipient and receiving bank. In contrast, the Send Money social payment app requires only the recipient's email address.

The final verdict
The new Send Money app appears to be game changer in the world of international remittances. Facebook users can instantly send money around the world with a few on-screen clicks, either for free or at extremely low costs. The money transfer process is protected end-to-end by PayPal security.

Consumers who are nervous about PayPal's new online payment service can test the waters by starting with tiny cash amounts. The author of this article was able to send a $1 remittance via Facebook to another PayPal user in under one minute with no problems -- and with no cost deductions.

The real test may be when delivered U.S. dollar amounts are converted into local currencies, should PayPal exchange rates become less competitive than other money transfer methods.

See related: 6 tips for a successful balance transfer; Facebook credit card deals without coupons