The market for foreign exchange and international money transfers is big. Really big. Not only do you have corporations paying overseas invoices or receiving foreign payments, but you also have, for example, expats (both working and retired), people making foreign investments, or buying or selling property overseas, and international students, most of whom have a need at some stage or another to send money to foreign bank accounts.
Just Two Options – Bank or Broker?
Until recently, if you were one of these people, you only really had two options: use your bank directly, or use a specialist currency broker, which is not a bank, but a company that focuses solely on foreign exchange and money transfers.
Even though things are gradually changing, the vast majority of people still use their bank. I’m guessing that the main reason for this is that people either don’t realise that there are better alternatives out there, or that if they do realise, then they’re not aware of quite how big the savings can be by switching. Unless you’re doing huge amounts (and I’m talking in the millions), AND you’re a good negotiator, bank exchange rates simply won’t compare to that provided by good specialist brokers. More and more people are becoming aware of this and are looking for alternatives.
Specialist brokers generally provide rates that can be 2% or so better than that offered by banks. They also tend to offer a more tailored and personalised service. Some are better than others though, and some of the biggest names actually don’t provide much value. Shopping around is made more difficult by the lack of transparency in the broker market, as most of them won’t give you a live rate online, even though they try to make it look like they do. They tend to have currency calculators on their websites giving an ‘indicative rate’, and ask you to call them for a ‘real rate’. It’s a bit of a scam in my opinion, and I will dedicate an entire post to it soon.
This is the age of the internet, social media, and the world being connected like never before, so it’s not really surprising that a third option now exists: the peer-to-peer exchange. Some consider it a natural, modern, and social evolution of the retail foreign exchange business; a way to connect people, allowing them to exchange currency directly and safely with each other rather than with an intermediary, providing associated cost savings and an additional level of transparency and control.
We’re excited by the growth rates we’re seeing here at CurrencyFair; the person-to-person concept is really catching on in currency exchange in the same way that it has in many other industries over the past few years. It is certainly interesting to see the market evolve, and we’re very much enjoying being at the forefront of this new concept in foreign exchange.