Who Can Benefit From A P2P International Money Exchange?

Peer to peer international money exchange is one of the fastest growing sectors in the financial industry, offering a number of great benefits to individuals and businesses alike. Compared to the traditional international system offered by banks and brokers, they offer considerable savings on the cost of changing currencies from small to very large amounts.

There’s naturally always a slight apprehension when using a comparatively new service such as a peer to peer money exchange – after all these brokers are based exclusively online, so you can’t pop into a high street branch is something goes wrong. However, the good news is that it doesn’t and some of these operators have handled over £1bn of exchanges without a glitch.

How does a P2P money exchange work?

Before running through the benefits, it’s important to have a grasp on exactly what this service is. It isn’t a crypto-currency in the fashion of the popular (but unstable) Bitcoin, rather it’s a form of connecting people looking to exchange their local currencies at a very affordable rate. In this way they operate like a brokerage for people to advertise what they are selling, looking to purchase and at what rate.

The number of currencies available is ever growing and even the more obscure transfers where there are no offers listed can usually be facilitated directly through the operator themselves. More on this point will follow, but these brokers essentially connect people – in sheer anonymity – and handle the exchange of funds for a small commission. The transfer is only complete when the funds are in place, essentially killing any risk of fraud. Plus, they are practically all regulated by the FSA – although you should always check beforehand that the operator is registered (almost all are).

How does this work to the advantage of an individual?

There are shared advantages for both individuals and businesses, but in a nutshell these sites offer a far more competitive rate of exchange than established banks. Typically they charge either a flat fee (say £10 for amounts below £2000) and/or a rate linked to the international exchange system used between banks themselves. A general rate of exchange offered by a traditional currency broker will add between 4 & 5 percent to this rate – whereas with P2P exchange it is typically no more than 0.5 percent. Let’s look at a couple of potential examples where this can benefit individuals transferring variable amounts:

A small exchange – say for holiday expenses of around £1000 – can be enacted at a far better rate than that offered by high street operators, who justify their rates by needing plenty of staff and physical premises from which to operate from. The funds are typically exchanged within a day (ideal for more exotic currencies) straight into the clients account. There’s no need for customers to worry about the vast exchange rates often ‘offered’ by overseas or airport exchange bureaus.

On the other hand a much larger exchange, for example £250,000 to buy an overseas property can enact huge savings. Like all financial vendors, the higher the amount in question, the lower the commission will be – with some sites offering as little as 0.2 percent commission. The potential savings compared to traditional exchanges could alone cover all the fees and taxes of buying said property.

Peer to Peer exchange for business

The largest recorded international currency exchange facilitated by P2P markets currently stands in the region of £17m. This significant transfer of funds is a showcase example of the inherent reliability of the P2P system and how cost effective it can be.

Rather than using the SWIFT system that traditional brokers use (that is in fact anything but – it’s notoriously expensive and slow), businesses will find that their currency arrives very promptly into their account in the destination country. This is ideal for companies looking to make an investment overseas as it can potentially – in some cases – legally circumnavigate some taxes. Considering the potential savings on exchange rates it’s very likely that P2P will become an ever more popular means of companies setting up an international presence to transfer large quantities of funds.