Stephen O’Hear reports that Taavet Hinrikus, Skype employee no.1, along with Kristo Käärmann, ex-Deloitte and PwC have established Transferwise, a currency exchange service:
…which hopes to give the banks a run for their money, along with disrupting the consumer-end of the money exchange market as a whole. The headline proposition is that the platform gives anyone access to the same mid-market exchange rates that banks get on their interbank market, with TransferWise charging a flat fee of £1 for each transaction regardless of the amount being exchanged. That’s potentially a big deal.
I am increasingly seeing businesses that trade in multiple currencies. Typical exchange service costs run 3-5% and so on face value this represents a god deal. However, banks are wise to this kind of thing and will attempt to charge on the in and outbound tansmission. HSBC for example charges a flat £17 for amounts between £1,000 and £10,000 on outbound transfers, even when that is in GBP. European banks are fond of charging for inter-bank euro transfers even though my understanding is these should free of charge.
It will be interesting to see what Transferwise defines as ‘mid-market’ rate. That can fluctuate from minute to minute so will we be looking at the day rate? Looking at the site, it seems they are using XE.com‘s rates as a starting point. There is a full ‘how it works‘ explanation. And what about transfer timing. Some banks will only accept transfer instructions if requested within a certain time window.
This is a good idea but one we have seen elsewhere albeit not quite as slick looking.
If transferring between different banks, the only way to establish whether Transferwise does what it says on the tin is to make duplicate transfers using different methods and see which comes out best. I’ll give it a run in the next few days and see how well it works.
It will be interesting to see if the founders are able to morph this service into a more complete banking operation with ATM access and if so, what user costs will be incurred.
