With the recent #Occupy movement continuing to gather traction globally, I decided to investigate what disruptive technology innovations are lined up in personal finance. Democratizing governments and changing regulations may take some time – but we can challenge financial institutions by adopting new services that reduce our dependency on them and save us money – and here’s how.
TransferWise is a peer to peer currency exchange start up. The start up offers users the true mid-market rate for currency exchange by matching other users trading in the opposite currency. There is a myriad of services operating in the currency exchange space who claim ‘No commission’, yet the markup that they offer is absolute rip off. There certainly is a time-value of money, but why would you have to pay extra for inefficiencies in the system? Banks are increasingly adopting efficient ways for handling settlements, so how do they justify the spread they charge for online transactions?
Taavet Hinrikus, co-founder of TransferWise was formerly the Director of Strategy in Skype and is an investor in several startups. He came across the idea for TransferWise about five years ago, when, after looking at the difference in buy and sell rates in his bank in the UK, he decided to call a friend in Estonia to ask if anyone needed british pounds and managed to do the swap between themselves.
Every month, more than a million pounds are exchanged through TransferWise. Currently, transfers are restricted to EUR and GBP only, but they are working on getting the US Dollar operational in 2012. The charges associated with domestic transfers between banks, makes dealing with the USD a little tricky. Transferwise charges a flat fee of £1 for any transfer – and that is used to run the operation.
The company is also working on making the payments process easier so that instead of having to fill in a form, the payment information comes as a pre-populated URL with account details and transfer amount. The average daily turnover for the forex market is in excess of $4 trillion and TransferWise has only begun scratching the surface.
If only if the service were operational a couple of years back – I would have saved a significant amount of money during my time studying and paying recurring tuition fees and rent!
BillGuard dubbed itself ‘Antivirus for Bills and Credit Cards’. The message could not have been
clearer. BillGuard uses data mining algorithms to aggregate the collective knowledge of millions of consumers posting billing complaints online and flagging charges on their bills.
Some people are extremely meticulous about their credit card bills. Others like me tend to overlook these – not because we trust everything that is on the bill – but because it is time consuming. We have probably never thought about how much hidden charges and cryptic merchant fees cost the average user.
According to their estimates, BillGuard reckons that the average consumer could save more than $300 through avoiding charges.The engine behind flagging suspicious charges takes into account information, not only from other users who may have flagged a similar charge or payment, but also from other news sources.
What is common between BillGuard and TransferWise is the fact that these technologies are increasingly empowering consumers to take more control of their finances. Although BillGuard is not a direct threat to financial institutions themselves, merchants will come under the scanners once user recommendations gather enough traction to expose ineffeciencies.
TransferWise on the other hand, can have a very significant impact on the digital generation. The more it evolves into a user friendly and trusted service, it can begin to disrupt the fundamental mechanism in which foreign exchange services make money off consumers.