Named as one of the top 20 innovations for 2015, Transferwise aims to help its users solve foreign exchange problems and beat bank fees while at it. Since people no longer rely on banks for all their financial needs, banks are starting to realise that they need to play nice with people.
“If you look around, whether it’s lending, asset management, or money transfer … we’re seeing specialist companies who are doing a much better job than the incumbent banks,” Taavet Hinrikus, the founder of TransferWise said. “That’s happened in the last couple of years because consumers are fed up with their banks. At the same time, people are feeling safer about using the internet. I’m convinced we will see 30-40% of finance being done by new companies, similar to what we see in other industries.”
TransferWise is making inroads as a foreign exchange service but it comes with a twist: it doesn’t actually exchange any money. Instead, it acts as a service which pairs people who want to get rid of a currency with those who want to get hold of it. It matches its users based on the currency they have or require, then initiates a simple and secure swap.
On how it works, here is a simple explanation. Money sent through TransferWise doesn’t cross borders at all. If A in Uganda wants to send money to B in Italy and C in Italy wants to send money to D in Uganda, the service just sends C’s money to A and A to D. This allows the company slim down its fees, charging about 90% less than banks charge to send money overseas.
According to its website, Transferwise has accounts across the world. The user pays money into the bank account in their country and the company pays the recipient from their account in the recipient’s country using the real exchange rate.
The service claims that it has no hidden fees or charges. “Banks invent their own exchange rate to hide their fees from you. TransferWise gives you the real exchange rate, also known as the mid-market rate,” the website said. For those concerned about the legality of the service, it is fully authorised by the UK Financial Conduct Authority.
Since the company started, similar services have also sprung up. However, it appears the TransferWise is providing a fully global foreign exchange service.
With the new restrictions on currency and foreign exchange in Nigeria, using this service might go a long way in eliminating the stress of getting currency from black market traders or through illegal means.
