TransferWise is at the forefront of the currency movement. That movement, if you weren’t aware, is the democratisation of currency exchange. This is the evolution which has seen the everyday customer be able to have access to what used to be exclusive, market rates of money at the click of a finger.
TransferWise wasn’t necessarily the first, but it’s the most culturally significant. Over a decade ago, the two Estonian owners of TransferWise who were living in London realised something. One of them was receiving his wages in Euros, but had British rent to pay, whilst the other way getting paid in GBP, but had a mortgage back home which required Euros.
Instead of both going to outdated brokers and losing a 2% or 3% margin, they decided to pay each other’s bills – one would put Euros in his friend’s Euro bank, whilst the other put Pound’s in his friend’s bank. By using the mid market rate, they were performing the most perfect, frictionless currency exchange conceptually possible. This P2P concept where no money crosses borders is what sparked the creation of TransferWise.
Finally, we are in a market where TransferWise competitors are plentiful. TransferWise rose to the top because they were one of the first to make currency exchange an accessible mobile application with a guaranteed competitive spread – but it’s their marketing that has been a huge factor too.
There are competitors that are just as cost-effective but lack their marketing prowess, or cannot compete against their incredible app. TransferWise had gotten in some hot water over their controversial marketing stunts, but like most creative PR teams, the stunts paid off in press coverage. Today, they have an extremely strong brand image and perform exceptionally well on Google rankings.
In fact, their SEO is so impressive that when trying to search about some of their competitors, a Transferwise blog post about that company will appear first. And, of course, whilst Transferwise are not excessively negative about competitors (they have a reputation of honesty) it’s still important that they can set the narrative.
When searching currency transfer on Play Store, you will see a few names pop out: Xe, TorFX, WorldRemit, Revolut, Remitly, MoneyGram, Western Union. The reason why TransferWise is the one you likely already know is because they are backed by big investors, as they’re seen as a “chosen one” when it comes to fintech startups.
They win the awards, they’re talked about, they have incredible marketing, and they inspire a tonne of confidence in investors. The only other company to do this to the same degree as TransferWise is Revolut.
Revolut is half the age of TransferWise, but is valued to be 10% larger at $5.5 billion. In only five years of existence, they have received well over double the amount of mobile application downloads. In fact, they’ve managed to persuade 10x more app reviews than TransferWise.
Revolut holds many of the same marketing powers, and are also a favourite amongst investors. What helped them enter this market was their relatively unheard-of Freemium model for FX: they offered free currency exchange on weekdays between major currencies. That was relatively unheard of, and felt like they were taking FX somewhere it had never been.
Their monetisation comes from optional premium accounts, which can see you trade with high max limits, free benefits like medical insurance and lounge passes and so on.
What money transfer company comes out on top?
Revolut is incredibly useful for some people, but many will want to exceed the relatively low limits they hold. For this reason, getting a Premium subscription isn’t ideal, as you don’t want to be paying more money than a Netflix subscription each month in case you don’t use it enough.
As you may have gathered, it’s all down to personal circumstance and personal preference. However, what’s important to note is that these are not the only two great choices. Moneycorp, for example, has vastly more supported currencies than both of the above, at 120. Revolut and TransferWise are relatively useless unless they handle the currencies you need.
Furthermore, the two big hitters are big hitters for a reason: the everyday person doesn’t necessarily use complex features. Therefore, neither company generally offers anything beyond day-to-day remittance. To be more specific, most of their competitors offer something that they do not: hedging.
Again, hedging used to be this distant financial product that wasn’t very accessible. But so was FX in general! This is why it’s a shame that TW and Revolut haven’t realised this, embraced the evolution, and offer extremely easy hedging services. It’s likely a matter of extra regulation, but companies such as Currencies Direct, WorldFirst, Global Reach have vanilla forward’s, participating forwards, order limits and so on.
Of course, if the service is being offered in an accessible way on a mobile app, it’s likely not going to also facilitate algorithmic trading and such. But, given the cheapness of these services, there’s no reason why retail traders cannot benefit. Revolut is unique in that they’ve expanded to commission-free stock trading and cryptocurrency – this is quickly becoming an incredible all-in-one app.
Generally, the customers should put themselves into one of two categories: day-to-day, frequent remittance, or large-sum transfers. Most companies that offer incredibly accessible one-click remittance like TransferWise are more focused on low-value transfers. This becomes easier to explain why, by explaining the other category.
Companies like World First are specialising in large-sum transfers. This is because their infrastructure is designed for it, and they want to offer dedicated account specialists to guide you through. Here, they can recommend hedging products or generally assess your situation. With more currencies and more services, you trade accessibility for depth of service and quality of customer service.
The good news is that signing up to these modern-day money transfer companies is a walk in the park. Taking all of a few minutes, you can have several apps for several situations and do the opposite of using a high street bank: reap the rewards of consumer choice.