On 7th September 2011, my first week in France, I made a transfer of £500 from my UK account to my brand new French one. With an exchange rate of 1.0717 plus a £10 bank fee, I received the grand sum of €535.85.
‘I didn’t think the pound was that weak?’ I thought at the time. ‘Has the country fallen into the sea?’
I checked and discovered that not only was the UK still there but the exchange rate was unmoved at around 1.14. So where did the 1.07 figure come from? And where did the rest of my money go? According to the market I should have got €569.41.
I mentioned it to my colleague. ‘But hang on Oggers,’ he said. ‘You’re never going to get the real rate when you exchange money? They always take a cut.’
If I had let my bank ‘take a cut’ over the past eighteen months each time I transferred my own God damn money, I would have handed over nearly £1,132 to Lloyds TSB in fees and criminally low exchange rates.
Luckily, I didn’t. I looked for an alternative. I found Transferwise.
There are a zillion different websites claiming to save you money on everything from carpets to erection tablets, world cruises to crane hire, nitrous oxide capsules to space travel. You’ve got to be pretty cynical these days and I am. Don’t worry. I’m Mr. Cynical. But Transferwise works.
I need five Euros to buy a sandwich in Lyon, but I don’t have any money left in my French bank account, but have stacks in my UK one. At the same moment, Pierre, a Frenchman living in London, needs four quid to buy a sandwich, but while he has loads in his French account, has run out in his UK one. What do we do?
We do a swap. I ask him to put five Euros into my French account from his French account. I reciprocate by putting four pounds in from my UK account into his UK account. This is of course all online. If the mid-market exchange rate is £1 to €1.25 on that day (i.e. £4 equals €5), we’re all square. More importantly, and this is key, we have completed a foreign exchange transfer at no cost to ourselves.
This is exactly what Transferwise does. Matching people all over Europe who need Euros, Pounds, Zlotys and Swiss Francs, but who don’t want to pay the ridiculous fees the banks charge. Using the mid-market currency exchange rate we come to a final settlement sum and the monies transferred into our respective bank accounts. All Transferwise do is administer the whole process and for their trouble charge a pound, or 0.5% for amounts over £200. Compared to the banks, it’s virtually free.
And it works. I wouldn’t write about it if it didn’t. Everybody I work with uses it. Savings are now running into tens of thousands of pounds between us. And that’s only six or seven people. The more people use it, the faster the system becomes. In the beginning, it sometimes took two or three days for the currencies to be matched, now I can sometimes have my cash in my French bank on the same day. All for a pound or so.
Let me remind you of the figures. You can do this at home if you’re not convinced:
For £500 on Transferwise today you got €580.73 – RATE: 1.1673
For £500 with Lloyds TSB today you got €552.45 – RATE: 1.1238 (that’s over 4p in every pound they take, plus the £10 fee). FACT.
Before Transferwise there was no cheap method to transfer money to my knowledge. And as all the banks had similar fees, it made no difference what bank you were with. Even if you were with a ‘so-called global bank’ like HSBC who have branches and ATMs all around Lyon, you couldn’t get your money without a fee.
Apart from saving me money, it has made me understand something that I have read from various sources over the past few years: this is that the supposed ‘free-market’ economy is nothing of the sort. Its protectionism dressed up as the free market. Banks and big business protecting themselves from innovation and a better world. It’s a club. A cartel. It’s why the system is so rotten. Pure capitalism isn’t allowed to flourish because everything is controlled by old boys meeting in private clubs to hold each others’ cocks to ensure nothing changes. Ripping off people so they can keep their fat snouts in the trough. Like charging people to access their own money.
Transferwise won’t solve everything. But it’s a start. Good luck.