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TransferGo‘s slogan is “Send money around the world. Fast. For just 99p” which is a super-cheap flat fee. In terms of price they deal at a variable 2+% to flat 0.45% (above £1000) on top of the mid-market rates with a known price when you deal. They also transfer in under 30 minutes and have a 96% 5* rating on Trustpilot which is the best in their sector.

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However today we focus on the transaction fee. How can they charge so little? Is there some way the transaction fee can trend to zero whilst keeping a constant spread to mid-market rates?

How do Fintech FX’s actually do transactions way cheaper than banks when, after all, all money is held in bank accounts?

As we have heard many times before it is not – contrary to some spin/PR prevalent in the market – by doing “P2P FX”. So how is it done?

Topics discussed on the show include these and more: 

• the first Lithuanian Fintech on the podcast
• Lithuania was the largest country in Europe at one point
• where the Lithuanian Empire went wrong
• why did the British Empire pack up and go home
• the characteristics that form empires and form Fintechs – especially drive and vision
• Lithuania as the last pagans in Europe
• Daumantas education and entrepreneurial background in the UK
• the outrageous pain story with a bank that led them to form TransferGo
• starting with a local bank account in Lithuania and scaling that model
• “ignorance is a blessing”
• the first year of TransferGo
• TransferGo considers remittances as small payments from one person to another person; payment they use for from a person/business to a business to pay for goods and services; they consider FX as larger payments (eg above £1k) where the cost of payment becomes more important
• cf remittances defined as payments from migrant workers, the other definition
• TransferGo are very focused on the smaller transactions being sent out real-time
• payments networks as the horizontal networks within major international banks that cross countries payments mechanisms – HSBC, Paypal etc; within these networks it is very easy for a bank to move money (even if they then charge the consumer a small fortune)
• how to bridge these networks?
• if you create a new network you have the same problem – you have just created a parallel banking network to all the other banks networks
• local transfers are “reasonably efficient”
• international payments between banks though are inefficient as the system – SWIFT – was designed in 1973 – 2 to 5 business days and high cost which was fine back in the day
• SWIFT is inherently a collection of nonstandard bilateral agreements between different banks
• “SWIFT is a broken Snapchat for banks”
• SWIFT was designed for a different world but does not meet the needs of the modern world
• sledgehammer approach  – just go out and open banks accounts at every single bank in the world – and you are then on every single network and bridge them all together
• this is incredibly time consuming – cf pull payments (direct debits) via GoCardless
• “we like this approach a lot, we will keep doing it and eventually we will get there”
• local in, local out  – they take money in locally and pay it out locally and never transfer via SWIFT
• bank account imbalances between currencies netted several times a day
• “P2P is at best a sideshow not a model”
• how real time payments and the 30 minute guarantee can be done
• can’t yet be 24×7 as local cut-off times
• TransferGo cover 45 countries globally
• economies of scale may mean at some point they can offer free transactions for those who don’t want real time payments
• TransferGo are 100 staff across 5 countries – London, Vilnius, Berlin, Warsaw, Istanbul
• TransferGo are the most-trusted company in their space based on Trustpilot – 96% 5* rating
• the 2D marketing effort, product effort chart of Fintechs
• the saying “we are an overnight success that took ten years to make”
• their marketing approach, how the business has grown

And much much more!

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