Traditional financial institutions are slowly starting to realize they have to innovate their business model, or risk becoming obsolete. Sending money around the world at these ridiculous charges, not to mention the amount of time it takes a transfer to complete, is no longer acceptable. TransferWise, a London-based money transfer startup, might be bringing something new to the table.
TransferWise – Making Money Transfers Cheaper and More Efficient
It goes without saying many everyday consumers are starting to get fed up with how the financial system works. Or to be more precise, why it takes so long to move money from one person to the next, even if it is within the same country, but passing from bank A to bank B. Waiting 2-5 business days to transfer money from your account to a relative 50 miles away is becoming obscene, and causes a lot of frustration.
That frustration is what lead to the creation of TransferWise, a London-based startup led by Taavet Hinrikus and Kristo Käärman. The main goal of TransferWise is letting people send money abroad at the lowest possible costs, by using real-time exchange rates, without any hidden fees.
After many years of frustration associated with transferring one currency to the next – and the hidden fees that go hand-in-hand with this process – both gentlemen decided to take matters into their hands. Rather than each exchanging local currency to foreign currency, they simply picked a suitable exchange rate for both parties and topped off each other’s bank accounts. A simple, yet elegant solution to solve a major problem.
Taking this small-scale business to the next level could not have taken place without a group of solid investors. Among that list are names such as Andreessen-Horowitz, Seedcamp, Virgin, and Index Ventures. Furthermore, TransferWise is supported by private individuals, with connections to Virgin, Skype, Paypal, Betfair, and other major companies.
It is important to keep in mind that, while TransferWise can accommodate for most major currency needs, they can not support all currencies at this time. For receiving and sending, most European currencies are supported by the platform. When it comes to international currencies – other than USD – they can only be sent abroad through local bank transfers. The company keeps working around the clock to enable more currencies, but for now, most of the major ones are supported in some capacity.
Even traditional banks and major financial conglomerates are taking an interest in the business model presented by TransferWise. During the startup’s funding round earlier in 2015, former Citigroup Chief Executive Vikram Pandit made a contribution to this project. If there is one sector that needs to come up with innovative and cheaper solutions, it definitely is the traditional financial world.
So far, TransferWise has proven to be quite a success, as the company processed over £3m in foreign currency. Embracing this system of peer-to-peer money transfers while cutting down on exchange fees seems to work out well, and many users around the world are enjoying this company’s services. So much so, that even TransferWise had to bump up staff numbers to about 400 people.
Adopting Blockchain Technology To Improve The Service
On paper, the service offered by TransferWise is excellent. Lowering the fees, and facilitating cross-currency money transfers is a powerful tool for many people. But despite all of that, there is still a lot of room left for improvement, especially if TransferWise ever wants to service customers in unbanked or underbanked regions.
Bitcoin’s blockchain, the disruptive technology that allows for instantaneous money transfers all over the world at a fraction of the costs, could prove to be of great value to TransferWise. Not only would it offer even faster peer-to-peer payments around the world, but there would also be a level of transparency, giving all parties involved a clear oversight of where money is coming from and going to.
Thinking about this idea from the mindset of traditional banking, transparency sounds a lot scarier than it really is. TransferWise has been able to cut out the hidden fees from the equation, and by adopting blockchain technology, they might just be able to cut out the banking system altogether.
Images courtesy of TransferWise, Shutterstock