Differentiate with digital

What Threat Do P2P Currency Exchange Startups Pose To Retail Banks?

Oliwia Berdak
Principal Analyst
April 16, 2015

This is a guest post by Alexander Causey.

Have you ever sent money abroad and been shocked by the amount the recipient is left with? Why can’t you ever get anything close to the exchange rates advertised on the likes of xe.com?

As a customer, transferring money internationally is often a costly experience. Despite claims of no fees, the exchange rate spreads are often significant. That’s where P2P currency exchange comes in.

Startups such as CurrencyFair, Kantox, Midpoint and TransferWise hope to solve this problem by using the power of peer-to-peer networks to match customers, both individuals and small business, with one another to significantly reduce the cost of currency exchange.

By matching currency orders travelling in opposite directions, these platforms remove the need for money ever having to cross borders, thus avoiding costly international transfer fees. Thanks to low overheads, they also offer exchange rates at (or very close to) the midmarket rate that you see on xe.com. As you can see from Midpoint’s calculator below, the savings can be substantial.

If you’re interested in finding out more about this emerging sector – one that has been backed by the likes of Peter Thiel, Richard Branson, and Andreessen Horowitz – you can read mine and Oliwia’s new report here. The report, the latest in our ongoing series about digital disruption in retail financial services, answers the following questions:

1.             What is P2P currency exchange?

2.             Who are the main players?

3.             What problem are they trying to solve?

4.             What headway have they made?

5.             Should we (retail banks and international money transfer firms) be worried?

6.             How can we outsmart them?

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