Finally it’s starting to look like technology has found a means to subvert the international money exchange system thanks to peer to peer currency exchanges. At present, the sector is one of the fastest growing in consumer finance and offers a wealth of advantages and generally much superior rates compared to the established banks. Even those that consider themselves market leaders in the business of currency exchange are being ever more undercut by P2P currency exchange services; and the great thing is that as this option becomes more established it can only grow further.
So what’s wrong with the traditional currency exchange system?
High street banks have long made a hefty dose of their profits by artificially raising the price of exchange currencies above the international bank exchange rate. Sure every company needs to turn a profit, but banks typically make around 5% of their profits by these exchange markets which were, until now, seemingly impervious to any alternative system. While there are companies that have been overtly set up and marketed to serve companies exchanging large sums at preferential rates, the truth is that even these operators are now being seriously undercut.
How has P2P currency exchange managed to become so popular?
In truth, it’s not just the popularity that is the fascinating issue here; it’s also how quickly the market has developed. Much of this has been down to people and companies becoming ever more willing to ‘think outside the box’ when conducting financial affairs – especially online. You can look at the prominence of alternative currencies such as Bitcoin becoming accepted as a viable (if temperamental) currency, how online shopping and business ordering has become the norm in day to day life and even a sense of frustration at the banks themselves following the crash of 2008.
Essentially the technology has made alternative systems of currency exchange viable, and they have been set up long enough now to prove that the system works.
How does P2P differ?
There’s plenty of in depth articles about the economics of P2P exchange but it’s worthwhile quickly outlining how the system works and why it is so able to undercut the banks. In a nutshell, a P2P currency exchange allows their clients to offer their domestic currencies at their own set rate of exchange and look for people abroad wishing to enact a similar trade – it’s essentially a match-making service. This is conducted under strict anonymity and the funds are managed through the site in exchange for a small handling fee. This makes the exchange of currencies a personal transaction based upon total anonymity, and the rates available can often seriously undercut the banks.
But isn’t it risky doing business this way?
Not at all, and this is one of the main reasons for the successful growth of the system. Not only are transactions all handled by the site itself – the exchange partner who you match with has no knowledge of your banking or personal details – making the site exceedingly difficult if not even impossible to defraud. The transfers tend to lean towards larger amounts for the best rates – making them great for businesses, especially those with international concerns.
Is p2p going to continue to rise?
All indications are that this is the case, especially as trade and lifestyles continue to become ever more internationalised. At present users need to have a bank account arranged in the currency that they wish to transfer funds to – say an account not just in the UK but also one in a Eurozone country to exchange into Euros or the USA to convert Pounds to Dollars. It’s not yet a viable option for personal, low-scale use such as holiday money but can save many thousands for larger transactions that otherwise would just be going towards the banks profit.
There’s no sign of the cynicism that people feel towards banks shifting anytime soon, and instead there’s a very good chance that P2P exchange will become a norm in the future – especially if rumoured services targeting smaller scale users come to fruition.
MidPoint offer a peer to peer money exchange that is one of the best established in this burgeoning marketplace. Take a look at their services to understand just how much P2P currency exchange can save you and your business.
