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New wave currency services...what's the catch?

The first thing to say is that you will not find a more vocal advocate for 'small payment' service providers than Prime Cap. We regularly and emphatically suggest services like TransferWise and Revolut to our clients and we see these fast-growing businesses not as rivals, but as signposts...front-runners in the marketing and publicising of the merits and value of the non-bank payments sector.

That being said, we believe that these providers suit a certain type of transaction, if not a certain type of client.

As succinctly as possible, we are going outline just one or two aspects of these populist and popular services that make them limited in their application and value.

Publishing the fees they charge immediately enhances the credibility and approachability of these institutions. It is something the banking sector daren't do. Transferwise make no apologies for the 0.35% fee they add onto your costs...and nor should they. It is an exceptionally low margin. But, as you will have seen mentioned across Prime Cap's various social media channels, the more you exchange the less competitive that rate is.

0.35% or £3.50 charge for sending £1000 to Australia is unbeatable. And given how inexpensive it is for TW to 'onboard' a client and the extent to which economies of scale on the account management side of things support their model, vast user take-up and volume makes for a compelling and sustainable business.


...a fee of £3,500 on an exchange of £1,000,000, although less than a high-street bank might charge (they would maintain their 3.5% or £35,000 margin) it is not competitive when compared to the offering of independent brokers who have the flexibility and discretion to charge less. And, frankly, this is the undoing of TW and Revolut et al's offering. Supremely competitive, but no more flexible than a banking institution. That 0.35% won't be reduced...ever - and is frequently higher on more 'exotic' currencies.

Revolut, like TW, is an extremely competitive way of sending smaller or more regular small sums instantly and for less...but, if a user exchanges more than their tier threshold they are immediately charged 0.5%. Customers can pay monthly for services reflective of the tier or category into which they fall, but, like TW this is where Revolut leave themselves exposed to being undercut. All an independent broker need do is augment their margin to undercut Revolut and the deal is won.

From preliminary research, £12,500 gives business users of Revolut unfettered access to mid-market rates of exchange. It is their highest user tier. Something to think on.

If you would like to discuss how Prime Cap might better the rates you currently receive, or you would like an impartial appraisal of your currency needs, please give us a ring on 02034175781.


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