Transferwise: How It Works?

One of the apps I’ve recently come to like a lot is Transferwise.

I use it very often to move funds between my Indian, American and Canadian banks.

It’s convenient (transfers money within hours), cheap (charges way less than a bank) and very well solves the “pain of international transfer”.

I wondered how it operates in the back-end and learnt something cool.

It all started from a private arrangement between two friends.

T and K, both were friends from Estonia (currency: euro) who worked in UK (currency: pound). Every month, K used to send an international transfer to family back home (convert his pounds to euros) and lost 5% on fees in the process.

He thought there has to be a better way.

He asked T – “Yo T-dog, I’ll transfer my pounds to your UK account. Bless me with some euros in my Estonian account.”

T-dog agreed.

That’s how K circumvented international transfer fees and Transferwise was born.

Transferwise is basically a crowdsourced currency exchange service that offers a cheaper alternative to established institutions.

Instead of using the inefficient SWIFT network, Transferwise routes payments by matching your transfer amount with other app users.

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