TransferWise – Peer-to-peer currency exchange

By Alethea Fernandes, Senior Account Manager, India, MSLGROUP

Do you remember the last time you had to transfer money across borders? Nine out of ten times you would have had a costly experience, but you stuck to it for the lack of better alternatives. Hefty transfer fees and tedious processes got Taavet Hinrikus and Kristo Kaarmann thinking about how to make cross-border transfers, a seamless and cheaper affair. A solution that would resonate with people globally and transform the way money was transferred across borders.

Hinrikus, Skype employee number one, and Kaarmann, with a financial services background from Deloitte and PwC, founded TransferWise in March 2010 with the proposition of moving money across countries using a mid-market currency rate, at a flat fee – by connecting people.


Peer-to-peer Currency Exchange

TransferWise follows a peer-to-peer lending model that almost bypasses banks. Relying on other people’s money to build its corpus, it is significantly cheaper, £1 for payments up to 200 in any currency.

For example, if someone in London wants to transfer money to his relative in Germany, he moves the money to TransferWise’s British account. The algorithm then spots someone in Germany who wants to make a transfer to London, and who deposits funds in the firm’s German account.

Rather than crossing borders, money is simply paid out of the relevant national account within 24 hours. Not only is it cheaper, the process is easier and time-saving.

TransferWise Bank
Transfer Amount £500 £500
Total Fee per transfer £2.49 £25
Currency Exchange Rate (GBP = USD) 1.67 1.48
Receiver gets £497.51  ($833.06) £475 ($703)

The company caught the eye of Virgin billionaire Richard Branson too:

“They are dramatically lowering the cost of transferring money overseas, by effectively matching people and companies in different countries who want the opposite currency.” 

What works for TransferWise?

  • Ingenious and savvy:TransferWise is a simple online website with a great user interface. Its appeal cuts across segments – from young working professionals working abroad, SMEs, MSMEs, start-ups with foreign subsidiaries and even retirees. To make it even more convenient, they launched a mobile app available on both, iOS and Android platforms. Transfer money on the go!
  • Transparency: For every transaction made, it explicitly tells you the mid-market currency exchange rate, the exact transfer fee applicable and how much you have saved as opposed to transacting through a bank.
  • Secure: TransferWise is licensed and regulated by the UK Financial Conduct Authority, the same authority that regulates commercial banks in UK and facilitates money transfers as reported by Bloomberg, XE and others. For the £1 billion they have helped customers move, they have had zero security issues.
  • Credible Backing: The Who’s Who of IT VCs have invested into TransferWise including PayPal founder and Facebook’s first financier Peter Thiel. They also have to their credit, reams of customer testimonials and endorsements. More than 70% of its customers are repeat customers.

Will TransferWise survive the test?

The TransferWise model is one that is easy to replicate and with a plethora of start-ups in the money transfer space, how quickly they expand across the globe, will be key. The other problem they potentially face is scaling up in countries that have fewer immigrants than expatriates.

Goodbye Banks?

Not yet. While TransferWise almost bypasses banks, it still needs a bank in the chain to complete the transaction. However, TransferWise has been revolutionary in challenging the currency exchange system and posing an alternative to paying high bank fees (TransferWise charges £2.49 while banks charge £25 for a transfer of £500).

A champion for financial transparency, TransferWise has enunciated the need for alternative currency exchange services. Earlier this year, they crossed the £1 billion mark in cross-border payments. The company now offers 20 currency routes and plans to include Chinese Yuan, Indian Rupee, Turkish Lira, and South African Rand.

This only demonstrates that people worldwide are embracing financial technology and peer-to-peer models, usually quicker than most financial institutions themselves.

Exciting times for personal banking, the change is coming!

Watch the Video: Send Money via TransferWise

This post is part of the People’s Insights monthly brief for April + May.

04 April & May – People’s Insights Monthly Briefs by MSLGROUP

MSLGROUP People's Lab

People’s Lab is MSLGROUP’s proprietary crowdsourcing platform & approach that helps organizations tap into people’s insight for innovation & change.

6 Responses to “TransferWise – Peer-to-peer currency exchange”

  1. Nidhi Makhija (@NidhiMakhija)

    MT @PeoplesLab Disruption in the world of Foreign Exchange, a la peer-to-peer platform TransferWise cc @Aletheaius

  2. MSLGROUP (@msl_group)

    RT @PeoplesLab: From our latest monthly brief: Disruption in the world of Foreign Exchange, a la peer-to-peer platform TransferWise http://…

  3. #LadyAlethannisStark (@Aletheaius)

    Read my take on @TransferWise – Peer-to-peer currency exchange via @PeoplesLab

  4. @Alfifius

    Read my take on @TransferWise – Peer-to-peer currency exchange via @PeoplesLab

  5. MSLGROUP Peoples Lab (@PeoplesLab)

    Peer-to-peer models are disrupting mobility, hospitality… and currency exchange. Meet TransferWise…

  6. MSLGROUP Peoples Lab (@PeoplesLab)

    Disruption in the world of Foreign Exchange, a la peer-to-peer platform @TransferWise


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