Everyone is looking for new big ideas in business, and very often breakthroughs occur by finding new ways of doing things we have always done by traditional methods.
This obviously has serious impact on businesses whose methods depend on the old way – global postal services have never really recovered from email, though it took a while, and the use of mobile and voip telephony is finally starting to dominate over fixed lines.
When it comes to finance industry disrupters the main player in the field, Paypal, has been around a while now – used by businesses and individuals globally to send payments quickly and easily, it has improved a lot since its early days and is very quick and convenient, although fees for receiving payments can be high. I use it within my business particularly when needing to send large numbers of small payments to research participants, as its far quicker and easier than any kind of banking.
Of course handling money requires a lot of trust, and interestingly whilst bankers as an industry rate very poorly on trust and approval research, the individual institutions we bank with we do tend to trust, because of the regulatory frameworks in place. We know bankers collectively brought the credit crunch and recession down upon us, but when we pay in a cheque or receive a transfer we believe in it and know its safe and available to us (albeit subject to crazy charges for every move we make in Spain).
Trusting someone else outside of that industry to handle your money is a big step, but for those of us needing to change money from one currency to another we quickly learn that brokers offer a far better rate of course. They are regulated and authorised (though without the same protection as banks if they go bust incidentally, which can happen), and most can collect payments via a debit and pay on to your Spanish or other account. For years I did it this way with little thought as I knew I got a better-than-bank rate and was happy with that.
But these days goodness knows every cent counts, so I was keen to find out more about Transferwise.
Lots about it attracted me, apart from the promised better rates: all online, disrupting the sector, built by some of the original developers behind Skype and Paypal. It’s extremely simple and fast to use with a nice online interface, that also shows you comparative rates on typical bank transfers – according to their site I saved over two hundred pounds on my last couple of transfers, over doing it via my bank (which I wouldn’t have anyway – but I did compare rates with two brokers, and the savings were closer to 70 pounds per transaction). I have offered my broker the chance to match the rate retrospectively but they could not do so.
Other things of course rang alarm bells, as they are NOT a financial institution, and the idea of peer-to-peer sounds great in theory but how does it work in practice? And exactly how do they undercut the established performers?
Right, disclaimer here: I am not a qualified financial advisor, and though I am delighted with the service I have received from Transferwise I advise you to satisfy yourself with your own due diligence before you do anything with your own money.
But as I understand it, Transferwise operate from a pool of cash reserves. So if I want to send £3000 of my money from a UK current account, I pay it to Transferwise in the UK; and once that is cleared Transferwise pay me €3200 or whatever out of their Euro reserves, into my Spanish account – my money never physically leaves the country of origin, which is why they can offer better rates.
They are regulated by the Financial Conduct Authority protection, and so far as I can tell (as a tech savvy but NOT financially or legally qualified consumer) they offer the same protection as a non-banking currency broker.
When you open an account you have to upload ID verification to prove you are not a money launderer, e.g. a scan of your passport, and this is well worth doing in advance of the day you want to transact.
You send funds to Transferwise via bank transfer or debit card (up to £2000k limit and within the EU SEPA area), then depending on the fee level you choose it is paid into your (or the recipient’s) Spanish /wherever account in 1 or 3 days (actually it happens same day on the express service if you start early enough)
The first time I used them I found an excuse to ring them up, after transferring a whole quarter’s tax payment to this place I had never heard of and suffering a moment’s panic. They had a London landline answered by an articulate and pleasant customer service person who assured me that my payment had been received and was being processed, and – it duly was. It just worked, and has done 3 times now. Like I said, I am just a happy customer and don’t pretend to any expertise as to mechanisms or security, check it out for yourself if you ever have to move money from one currency to another – salary, pension, rent, whatever.
They have a referral scheme, which offers me a small payment if you use this link – and they will also give you a FREE transfer (ie no handling fees) on your first go. Let me know how it goes! @casslar
Update: interesting review and analysis of Transferwise, compared with other forex purchase methods, on Radio 4’s Moneybox this week http://www.bbc.co.uk/programmes/b045xntk
Costa Connected, for Costa Blanca News, May 16th 2014 ©Maya Middlemiss, Casslar Consulting SL