Is CurrencyFair good for business?
Brett Meyers, co-founder of peer-to-peer foreign exchange platform CurrencyFair, tells Startups how the platform works and how businesses can use it
With start-ups and small businesses now needing to think more ‘global’ than ever before, the process of sending or exchanging international currency as cost-effectively as possible is paid scant attention by some.
An entrepreneurial expat himself, Brett Meyers saw this hidden expense all too well and knew something needed to be done.
Co-founding CurrencyFair in 2009, the online exchange platform has transferred over €4.5bn since inception – and claims to have saved users over €160m.
Speaking exclusively to Startups.co.uk, Meyers explains how small businesses can benefit from the service…
In the simplest terms how would you describe what CurrencyFair does and how it works?
CurrencyFair is a completely new and different way to move money – based on marketplace technology. I got the idea through my own experience as an expat when sending money home to Australia. I often knew well in advance when I was going to shift some money, so I would look at the exchange rate and try to pick my moment. When I was ready to exchange, I figured out a way to avoid the bank fees, a bit of a life hack really.
I had a friend that had recently moved to London from Perth, who had Aussie Dollars at home and needed Sterling. I had Sterling from time spent in London, so I gave her a shout and we organised a private trade – but we used the real rate, the interbank rate that banks give each other, not the horrendous rate that they give everyone else!
We both saved a fortune, and because we both made local transfers using online banking, the money didn’t actually move internationally. Local transfers are free and fast, so the cash only took one day to arrive rather than a week through the bank.
CurrencyFair is basically that personal trade on steroids – a huge, online marketplace where individuals and businesses get an amazing exchange rate and fast transfers of cash. And we’re fully regulated so you get the added safety and security of transacting with a respected financial services organisation rather than an individual person or small business directly.
Where did the market for it emerge from?
Well the market for CurrencyFair is huge. It’s any person or any business that needs to send money internationally. For businesses it might be paying foreign invoices, and for individuals it might be expats moving their savings home, or retirees buying foreign property.
There’s a huge amount of money that flows around the world for these reasons, and traditionally it was only served by banks who took ages to move the funds (often more than a week) and charged huge fees (well over 3% in most cases).
Around the turn of the century, foreign currency brokers came on the scene. These guys dealt in foreign exchange transfers through the wholesale market, and were able to charge a little less than the banks, maybe 1.5%. There was nothing that magical about it – it was just a bit more efficient and therefore a little bit cheaper.
CurrencyFair is essentially the next stage in the evolution of this market – the application of marketplace technology to reduce costs even further, while improving the customer experience.
When do small and growing businesses need a platform like CurrencyFair?
Basically any small, growing business that transfers money overseas, or receives money in foreign currencies, can save using CurrencyFair.
Some common examples that we see on the transfer side are paying foreign invoices for goods and services, paying staff or contractors that work remotely, and moving funds from foreign operations. These savings for a business go directly to the bottom line, so what might seem like a small saving of 2% or so might actually have a significant effect on profits.
What situations might the exchange be most useful for?
We’re increasingly seeing businesses also use us to receive money in foreign currencies, as exporters choose to invoice customers in their local currency. When you sign up with CurrencyFair it’s like getting access to a multi-currency wallet – you can receive and pay funds in foreign currencies with complete control over the timings and exchange rates and very low fees.
What kind of track record do you have of working with small businesses?
Currently businesses represent about 15% of the volume that flows through our exchange, and this is growing over time. We’re seeing a lot of businesses that previously used their bank starting to focus more on the exchange rates, particularly with the volatility around Brexit.
Once they do their research, and realise how much they can save with very little effort, they make the switch. Often we hear that they kick themselves when they realise how much they’ve lost over the years by not switching earlier!
Why is CurrencyFair a better option than other exchanges?
CurrencyFair is the only true marketplace exchange out there. Everyone else really uses a broker model, where they access funds from the wholesale market and add their own pricing on top.
CurrencyFair lets you choose: when speed is a priority you can use the instant exchange option, when you have some leeway on time, choose a better rate and wait.
This unique exchange model has the lowest fundamental cost since we’re not reliant on the banks for making the majority of our exchanges, and we’re able to pass this on with unbeatable pricing. So you get the best rates on the market plus extra choice and control, a win-win.
What range of transactions is CurrencyFair most useful for?
If you are regularly transacting above a couple of thousand pounds you will save an awful lot of money over time using CurrencyFair.
If the amounts are smaller you can still use the platform of course, but we do have a £2.50 fee for making each foreign transfer, which is obviously more significant if the amount you’re sending is small. That said, it’s still much cheaper than a bank transfer.
How quickly can the transactions take place and what are the steps to make it happen?
Setting up an account is easy. We connect directly into Companies House to speed up the process, and we partner with third-party providers to, where possible, automate the verification of key individuals within your business.
Once set up, the length of time for a transaction to be completed really depends on the currencies being exchanged but typically a standard Pound to Euro transaction can be completed on the same day. Other minor currencies such as Hungarian Forint, Polish Zloty or South African Rand might take a few days.
How much do small businesses have to pay? What are the typical costs associated with using it?
The average amount paid to exchange funds is less than 0.4%, and less than 0.3% on certain currencies like Euro to the Pound.
Of the customers that choose to set their own rate and wait, more than half actually end up beating the interbank rate – meaning they pay nothing at all to exchange, or even make a little bit of money! That is truly unique. On top of that we charge the flat £2.50 fee for sending funds out to a recipient.
Are there any other services CurrencyFair can offer?
The main focus of our business product is to help small businesses move money from one currency to another as quickly as possible, and at a great value exchange rate. We believe every business should be able to access the same great rates that big businesses can.
Over the coming months, we’re planning to roll out more features that further help businesses manage international transfers more efficiently. Watch this space!