By Mohammed Waseem
We know how Skype works…There is transfer of data packets from both ends, using the VoIP, which uses the Internet.
A money transfer service called TransferWise claims that it is the Skype of money transfers. It claims that money will be transferred to a foreign country at the lowest cost and at real exchange rate of the market.
Any money transfer service you choose, if you compare their exchange rate with the real rate for that day, you will find a difference. This is because they make money equivalent to the difference in the rates, apart from the fee they charge.
Consider Spain and England for example. When a sender from Spain initiates a transfer, he is required to deposit cash into TransferWise’s bank account in Spain. The algorithm then spots someone from England wanting to make a transfer to Spain. He is required to deposit the money into TransferWise’s bank account in England. Without an international transaction, both senders from Spain and England successfully send money to their relatives or friends.
And how does TransferWise make money? The sender is charged £1 for amounts lower than £200 and 0.5% of the transaction amount for transfers over £200. Money is delivered in 2-4 working days. For express delivery, which takes relatively lesser time, they charge a slightly higher fee.
This service works well between countries which transfer roughly equal amounts to each other and may have lesser significance and appeal for pairs of countries where the amounts transferred between each other don’t match.
TransferWise is confident that they can provide a tough competition to leading money transfer services due to the real exchange rate and lower fee. But as I said above, this may not work well for countries where transfer amounts don’t match.
According to The Economist, in the first year of its operation (2011), TransferWise transferred £10 million and reached £50 million in the next year.