Peer to Peer Money Transfer Firms
- Currencyfair Vs Transferwise (the large Peer to Peer companies)
- Transferwise vs World First (how do they match with the best providers)
Peer to peer currency exchange relate to companies that allow clients to send money directly between two marketplace participants (each using a different currency) in a decentralized way. The term is derived from the world of computing, where a P2P application refers to a program running on two or more terminals, where each peer has equal privileges.
How Does P2P Work?
The concept is quite easy and simple to understand. Whereas in a standard money transfer with traditional companies like UKForex, companies earn money by directly selling or buying a currency from you, with peer to peer you trade currencies with other marketplace participants (while the platform you use takes a small markup on top in order to benefit).
Which Companies are Included in that Definition?
There are very few firms that meet the criteria, even by their own definition.
- Transferwise: The largest most recognizable firm which literally coined the term Peer to Peer transfers with its constant media coverage.
- CurrencyFair: The second largest Peer to Peer currency firm. Sort of a combination between an eWallet (transfer currency and get it in your account without having to withdraw) and a currency firm.
- MidPoint: We have failed to understand how MidPoint is any different from a traditional corporate-oriented FX firm, and why do they claim to be P2P.
- MoneySwap:: Have a currency exchange marketplace on their platform.
CurrencyFair VS TransferWise – Side by Side
CurrencyFair and Transferwise are two somewhat similar companies. They are quite recently established (2010 and 2011). They are both quite heavily backed by investors (Transferwise to a larger degree, by having Sir Richard Branson on board). They are both interesting, new and exciting, and thus, are currently getting a ton of coverage on mainstream media. In addition, both companies constantly receive positive online reviews from clients.
What differentiates between Currencyfair and Transferwise?
Global Reach: Transferwise is winning this category hands down. While Currencyfair only deals with UK, EU and Australian clients, Transferwise is also available to North American clients. While Currencyfair deals with only the major currencies, Transferwise is starting to expand into new currencies and addresses remittances transfers and not only intra-European transfers.
Fee Structure: With Currencyfair you can achieve better rates because there’s an actual rate marketplace. If the transfer is made through the marketplace Currencyfair charges only 0.15% on top of the agreed rate as a fee. With Transferwise, you will pay a fixed 0.5% spread on major currencies and up to 1.5% on exotic currencies.
On the other hand, Currencyfair has a fixed fee per transfer of 3 Euros minimum, and up to USD 40 per transfer, and it is not likely you will find a match for you transfer on the Peer to Peer marketplace. So we believe the average cheaper overall transfer will be made with Transferwise.
Rate Fixing: With Transferwise, you can fix the currency rate as soon as you’ve signed up and been verified. When you make a currency exchange request, you can click on the lock icon which will verify the rate will not fluctuate by the time you fund it. CurrencyFair do not have this option.
Keep Funds in Account: With Currencyfair, you can keep any amount of money, in any currency (As long as it is supported by them), in your online account. With Transferwise, you can’t.
Our Verdict: Transferwise, in our opinion, is a better option than Currencyfair for almost everyone because it’s a bigger company, and thus, in our opinion, more reputable. At the end of the day this is a very determining factor when it comes to international money transfers. In addition to that, Currencyfair’s markup as slightly higher when not using the “P2P marketplace matching” (which is only normally used by experts, and isn’t likely to have enough liquidity to find a match for most transfers). In addition to that, Currencyfair levies high fees on exotic currencies.
Peer to Peer Compared to Traditional Foreign Exchange
Pros of Peer to Peer Companies:
- (Almost) complete transparency in pricing. You understand not only the fixed fees that come with each transfer. but also the spreads used.
- Small fixed fees and lower exchange rates than the default one assigned by traditional Foreign Exchange companies.
- Easier registration and sign up (Facebook sign up for Transferwise).
- All the process is done online.
- Send any amount.
- Strong, easy to operate, online platforms.
- Foreign Exchange marketplace which allows you to potentially pay close to nothing in exchange rates(if you find a match) – which is only relevant for Currencyfair.
- High client satisfaction in both companies, with over 90% positive reviews by clients on platforms like TrustPilot.
- eWallet functionalities (keep funds in account) – relevant for Currencyfair.
Cons of Peer to Peer Companies:
- Newer companies which are venture-backed, while traditional FX firms like Moneycorp have gained their reputation over the past 30 years.
- Not complete transparency with pricing. For instance with Transferwise, unless you lock in the rate, it can fluctuate by the time you fund your transfer. This is quite different from traditional FX, which firms the price is locked to the date of the agreement. Another example is fund withdrawal fees with Currencyfair.
- Fixed fees on transfers, while some companies don’t charge any fees on transfers. An example of that is Currencies Direct, which have a 0 fee policy regardless of transfer size or location.
- Exchange rate, being non-negotiable, can end up higher than the one you can reach with other firms through negotiation. For some currencies, especially exotic ones, the default exchange rate spreads offered by Transferwise are not better than ones offered by traditional firms.
- The P2P payment system isn’t build for B2B like the platforms offered by FX firms. There are no additional functionalities built into the system like multi-payments, regular transfers, and rate watch (which is offered with firms like Currencies Direct).
- If you decide to wait for the best price in CurrencyFair market you have to be an expert, because if you don’t forecast the exchange rate fluctuations, you may end up losing money in the process (instead of saving money by lowering fees).
Side by Side Comparison:
Transferwise vs World First / Currencyfair vs World First
(Transferwise vs World First, in this case, as we have already said we believe that Transferwise is a better option than Currencyfair)
World First is more diverse for sure than Transferwise. Transferwise is about moving remittances from point A to B with little hassle and great rates. World First is the whole package. You can top notch guidance from a dedicated dealer, and can find a solution made for your specific needs. We believe that for transfers of £10,000 and up, World First is a better choice.
Is P2P Foreign Exchange a Hype
We believe it is.
Don’t get us wrong, as Transferwise and Currencyfair are great options for low-fee high-saving international transfers, and can definitely help clients save money not only compared to banks but also in comparison with other firms. Still, they bring little promise with them.
In fact, Transferwise doesn’t even brand itself as a P2P firm anymore (whereas their early campaigns really capitalized on that), and we strongly believe it’s because the vast majority of their transfers match against the company and not via the marketplace. The profit margins are set at 0.5%, so what’s the point of having a marketplace?
With Currencyfair, the situation is a tad different. In practice, we assume that most of their transfers are indeed matched against the company itself (offering a 0.4-0.5% spread), because waiting for liquidity for a certain currency pair is something that takes time and expertise. It requires of you to assume where currency prices are heading, and assuming the current market liquidity/offering, to build yourself the best deals for your requirements. So we do think Currencyfair deserves the P2P title, but we are not sure their marketplace functionality is relevant for the vast majority of our readers.
The whole idea of exchanging between currencies in real time seems a little suspicious to us. Besides very liquid currency pairs like the GBPEUR, a platform will require a LOT more activity to be able to handle something like that. In fact, this is how FX companies operate on the back-office. Additionally, they try to predict the demand for certain currency in certain times, they try predict the exchange rate trending, and build their trading and hedging strategy based on these statistics.
So, to summarize, if “P2P” stands for person to person payments, then all FX firms match the definition. If the term “P2P” relates to trading two currencies on both Buy/ Sell and trying to match each Buy Order with a Sell Order, then still, nothing makes Transferwise more Peer to Peer’ish than its competitors like World First, which also engages in the same activity to maintain high profit margins.
Still, Transferwise and Currencyfair bring a few unique things to the table that might make them the best companies for currency transfer for particular audiences. They apply for small or medium transfers with their fixed rates, because they are essentially offering the best fixed rates (and no need to haggle for them). They are also attractive for experts (CurrencyFair that is), who have large reserve of FX and want to trade them at the absolute best price (and are willing to wait and risk depreciation in currency value). So in order to understand which ones is better – Transferwise VS Currencyfair or Transferwise vs World First, you have to know what your goals are.
Additional read – Transferwise VS Paypal fees