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Meet the $1bn startup changing how we transfer money overseas

TransferWise, a London-based international money transfer start-up, has been attracting plenty of attention since its launch in 2011. You might have already seen its tongue-in-cheek adverts on Facebook, featuring sad bankers painted blue. It seems its tactics are working; recent headlines herald a $1bn valuation for the four-year-old company.

TransferWise is a peer-to-peer currency transfer site that cuts out middle men. To see how this works, imagine you’re in Britain and want to pay for a $200 purchase in Ohio. TransferWise might find a woman in New York who wants to exchange her $200 into sterling for a holiday in the UK. The company will then just move the dollars from New York to Ohio, and the sterling between the two British accounts.

The big question is if it's safe. The answer: yes. TransferWise manages the exchange with the person on the other end, and all funds are moved through it in accounts separate from the company’s own. That makes this innovative approach just as secure as trading with banks. 

Users of TransferWise get interbank rates and the company charges a small fee (usually below 1%). This is very attractive compared to services like Western Union, which charges more like 10%, and certainly isn't the best way to transfer money. As the system relies on someone needing to transfer currency in the opposite direction to you, the downside can come when you're dealing with rare currencies. When transferring large sums into these rare currencies, a broker is your best option. They also usually don't charge a fee on transfers over £3,000. 

While it might not cover all money transfer needs, TransferWise's popularity is proven by its numbers. It's grown at a rate of 15-20% per month, with over £3bn transferred already, saving its users an estimated £135m. TransferWise and other similar services (notably Midpoint and MoneySwap) are part of a wave of innovation the finance sector has needed for so long, something the 2008 financial crisis played a major part in halting. Q4 of 2014 saw unprecedented growth in the financial tech (aka 'fintech') sector, and the international money transfer market is helping to continue the trend.

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