CurrencyFair Rides Irish Fintech Wave With Money Transfer Market
These days, people can send a text message halfway around the world in a matter of seconds, but wiring money across the globe can still take several days. And the typically poor exchange rates and fees charged by banks and other intermediaries can make international money transfers “a blatant rip-off,” in the blunt assessment by upstart Irish fintech company CurrencyFair.
That’s why CurrencyFair’s four founders—three of them former bank employees, which they lightheartedly apologize for on their website—set out in late 2008 to create a simpler, faster, and cheaper system for international money transfers, using an online peer-to-peer marketplace.
“The whole concept is rather than having a big intermediary, let’s try to get those buyers and sellers closer together again,” CurrencyFair co-founder and CEO Brett Meyers says.
His company is one of the leaders in the burgeoning Irish fintech scene. Most people have heard of Stripe, the Irish-founded payments startup (now in San Francisco), but a whole generation of smaller companies has grown up in the shadow of the financial crisis. Recent efforts to boost local startups include the NDRC FinTech program, which has backers from the public and private sectors, and Accenture’s new fintech accelerator in Dublin.
The financial crisis has spelled both opportunity and consternation for CurrencyFair. On one hand, consumers have felt angry with and mistrustful of banks because of the role they played in the global economic crisis. That frustration has made people more willing to try alternative financial services provided by tech startups like CurrencyFair, says Meyers, an Australia native who previously worked as a JPMorgan Chase analytics manager in Ireland for three years.
On the other hand, the financial crisis brought road blocks that CurrencyFair had to hurdle before it could start wooing customers. New European regulations muddied the approval process required for companies that handle payments.
“We hit everything at the wrong time,” Meyers says.
CurrencyFair applied for approval in Ireland in mid-2009, then was told that new rules were being implemented in November that would allow it to receive European-wide approval as a payment services business if it passed muster with the Central Bank of Ireland. CurrencyFair execs re-applied under the new regulations, but were left twiddling their thumbs for several months, waiting for the green light to flip the switch on their website, Meyers says.
“The regulators were under pressure. They were just taking ages,” Meyers (pictured below) says. “I can still remember the feelings of frustration burning through cash, just waiting, waiting, waiting.”
Finally, CurrencyFair got the go-ahead to launch in May 2010. The company grew modestly for the next three years, partly because it was spinning its wheels until it improved its software, Meyers says. The technical co-founder left the business, and a new CTO was brought on, he says.
CurrencyFair has expanded rapidly since 2013, when it raised $2.5 million from Frontline Ventures, which has offices in Dublin and London, and angel investors. CurrencyFair has raised more than $7 million to date, Meyers says, and its other investors include Enterprise Ireland.
In the past year, the company invested more heavily in marketing, product development, and staff expansion. It grew from eight employees in early 2013 to nearly 50 today at its Dublin headquarters and satellite offices in Australia and the U.K. The startup has handled more than $1.6 billion in money transfers to date, and its daily transaction volume has jumped significantly in recent months, to more than $6 million, Meyers says.
“We’re starting to get things right,” he says. “You really feel like you’ve got some momentum.”
Here’s how the startup’s system works: Say an Australian native working in Ireland—call him John—wants to send money to his bank account back home. He deposits his euros into an account with CurrencyFair and searches on CurrencyFair’s marketplace for other users who want to send money in the opposite direction. The company’s software matches him up with Jane, an international student who wants to transfer funds from Australia to her Irish bank account. CurrencyFair exchanges the money by executing domestic bank transfers in Australia and Ireland, so Jane’s Aussie dollars get deposited into John’s Australian bank account and John’s euros are moved into Jane’s Irish bank account. The advantage is that domestic bank transfers are usually free and clear quickly, as opposed to international transfers, which are traditionally laden with fees and take longer, CurrencyFair says.
The company charges a fixed transfer fee of 3 euros per transaction, plus a margin on the exchange rate that averages 0.35 percent of the transfer amount. Banks tend to charge a series of fees (some of them hidden) that often amount to around 5 percent of the transfer total, CurrencyFair says.
A distinguishing feature of CurrencyFair’s marketplace is the ability for users to set their own currency exchange rates. In theory, this means someone could actually find a better deal on CurrencyFair’s marketplace than the “wholesale” exchange rate that banks get—the current actual value of a currency, like 1 British pound being worth 1.27 euros—and effectively make a tiny profit off the transaction. “If you beat the interbank rate, then what you’ve bought is worth more than what you’ve sold, so in effect you have made money,” Meyers says. The best rates offered by users are typically 0.2 percent better than the interbank rate, he adds.
CurrencyFair offers transfers between 20 currencies right now. Most of its business comes from … Next Page »
Jeff Engel is a senior editor at Xconomy. Email: firstname.lastname@example.org