Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

TransferWise announces $280M investment

techcrunch.com

Post reply on HN
Print view View original

61–70 of 176 posts

Re: TransferWise announces $280M investment

#61

Post by charlesdm »

consz wrote: post #60
charlesdm wrote: post #55

Earlier quoted context omitted.

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%. These days, I convert through my broker, because they only charge me 0.2% for FX conversions.

It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

Of course they would. Most people don't understand how the fee structure works, so will comply.

You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.

Re: TransferWise announces $280M investment

#62

Post by neximo64 »

phillc73 wrote: post #40
seanalltogether wrote: post #7

Transferwise has been a godsend for me the past couple years as I've been moving my life to the UK from the US. XE was bought out awhile ago and hiked their fees up, while banks like HSBC have always had high rates to begin with. Although I'm wondering if jumping on a bitcoin exchange like GDAX to go from USD -> bitcoin -> GBP would be even cheaper these days?

Just to add another data point, TransferWise have been the single most useful financial service for me over the last three years. In 2000 I moved from Australia to the UK. Transferring money between AUD and GBP accounts was always a bit painful. The banks charged too much and took too long. I even signed up with a dedicated forex trading firm, but at the time they did not offer an online service, so there was still e…

Its amazing they can transfer to the UK within the same minute now.

Re: TransferWise announces $280M investment

#63

Post by consz »

charlesdm wrote: post #61
consz wrote: post #60

Earlier quoted context omitted.

It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.

I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.

Re: TransferWise announces $280M investment

#64

Post by charlesdm »

consz wrote: post #63
charlesdm wrote: post #61

Earlier quoted context omitted.

Of course they would. Most people don't understand how the fee structure works, so will comply. You can open up a brokerage account at Interactive Brokers with a few thousand and use it to exchange FX. It's pretty accessible.

I agree, most people are just not aware. I like the machines I've seen in airports and train stations that offer currency conversions. They have 'No Fees! No commission!' posted all over them -- ignoring the fact that the bid-ask spread they're charging is 15-20%. Again, criminal.

Sad but true. :( That said, people do pay for convenience, which I assume is the main function of those cash machines. If I end up in a foreign country that I haven't visited before, I'll likely withdraw some cash (not much) from one of those machines just to be safe.

You never know when your credit cards might stop working.. (I've had my main card blocked randomly while travelling and it frankly was a pain)

Re: TransferWise announces $280M investment

#65

Post by mseebach »

thisisit wrote: post #49
mseebach wrote: post #36

Earlier quoted context omitted.

That's not what capital intensive means[1]. A company that has low margins as its business model necessarily needs to have a large body of transactions to get much revenue. Six years to get profitable is not really a remarkable period for a VC-funded company. 1: It means requiring lots of capital to get set up, eg. because you need to aquire expensive assets to run your business. Buying your own hardware is more capi…

Yes. Sorry, incorrect choice of words. So the question is if the margins are so low that they need a billion dollars to make a profit, what kind of scale do they need to be worth a billion dollars. And it somehow it makes me question their business model as well. Sooner or later they will be tempted to raise fees and get more profitability.

It's easy to get distracted by the value of the transactions, but they're just the payload. Nobody is "buying" a product worth those billions in transactions, the same way someone bought $N worth of books for a bookseller to have $N revenue.

A shipping company is evaluated on its ability to move containers, and nobody cares (well, the insurer does) if the containers are filled with iPhones or cardboard, as long as the customer pays the shipping fee.

Re: TransferWise announces $280M investment

#66

Post by mseebach »

lmm wrote: post #57
thisisit wrote: post #49

Earlier quoted context omitted.

Yes. Sorry, incorrect choice of words. So the question is if the margins are so low that they need a billion dollars to make a profit, what kind of scale do they need to be worth a billion dollars. And it somehow it makes me question their business model as well. Sooner or later they will be tempted to raise fees and get more profitability.

> So the question is if the margins are so low that they need a billion dollars to make a profit, what kind of scale do they need to be worth a billion dollars. Well, if we're assuming P/E=20 then they need to be heading for 50 million dollars in profit. Let's guess their "gross margin" from their spread is 2%, so they're currently at top-line revenue of 2 million dollars (and the same in costs). So if their costs we…

I would assume that they will be able to get significant revenue from building higher-value-added services on top of their infrastructure. The "Borderless account" is a potential step in that direction: https://transferwise.com/borderless

Re: TransferWise announces $280M investment

#67

Post by dboreham »

graniter wrote: post #58

I don't understand what TransferWise offers beyond what PayPal does. Why not just send yourself money using 2 PayPal accounts? Are they cheaper or faster?

You might also consider "more legal" as a factor. I don't believe PayPal wants you to have two accounts with different currencies.

Re: TransferWise announces $280M investment

#68

Post by briandear »

dovdovdov wrote: post #22
a_d wrote: post #2

I used to study remittance flows for a living. This was a problem that was (is?) begging to be solved. Incumbents like Western Union have always been very expensive and borderline evil. There are well known “corridors” of remittance flows that are still yet to be captured - like Kerala (India) Saudi Arabia (Middle-east more generally); Mexico US; US LatAm etc. My guess is TransferWise captured the UK Poland corridor…

It's clearly a service mostly depending on eastern (central) european migrants working in the UK. I wonder if brexit doesn't fall through what will it do to their single leg business. And even if brexit fails, these people will become less and less dependent of their home country. (moving close family to the uk, paying off mortgages) So yeah, my point is these untapped areas can dry off quick. (I'm talking a decade m…

I use them to move money to/from Europe, The US and Mexico. I used a competitor a year ago. My point is that their business seems to be far beyond a significant Brexit risk.

If they gain inroads in the US Mexican/Central American community, the UK-Eastern Europe segment will pale in significance.

Re: TransferWise announces $280M investment

#69

Post by TorKlingberg »

consz wrote: post #60
charlesdm wrote: post #55

Earlier quoted context omitted.

In general, banks do charge excessive fees on exchanging currencies. For example, if you want to exchange €1,000 to $ or £, they'll charge you (by default) a 2.5-5% conversion fee. After negotiating with them, you generally get it down to 0.3%. These days, I convert through my broker, because they only charge me 0.2% for FX conversions.

It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

With a brokerage account, how easy is it to get your foreign currency sent to a bank account in that country?

Re: TransferWise announces $280M investment

#70

Post by charlesdm »

TorKlingberg wrote: post #69
consz wrote: post #60

Earlier quoted context omitted.

It's insane, borderline criminal. I knew someone who wanted to convert ~1m AUD -> USD -- and the banks were still trying to offer to do at 2-3% ! At that amount, you can open a brokerage account and trade through EBS or CNX directly and pay basis points.

With a brokerage account, how easy is it to get your foreign currency sent to a bank account in that country?

Very easy. Check out Interactive Brokers (horrible interface, but great rates)
Post reply on HN