INNOVATORS:CURRENCYFAIR.COM was developed by Australian expatriate Brett Meyers, who became frustrated at bank charges associated with changing currency. With a background in structured finance, Meyers was able to find the interbank rate – the level banks buy and sell currencies with other banks – and quickly realised he was being charged far more.
To avoid these fees, which can be as high as 3 per cent, he sought to exchange currency with friends or colleagues based on the interbank rate.
In the summer of 2008, Meyers started discussing how to create a market to buy and sell currencies without bank charges with friend and colleague Jonathan Potter.
“An Australian with a flat in Sydney that he rents out to help pay for his accommodation in Dublin or London – he is getting fleeced every time he exchanges into euros or sterling,” says Potter. He describes the system as an “order-driven market”, similar to that used by BetFair.
“It is about matching people who want to sell euros and buy Australian dollars with others who want to sell Aussie dollars and buy euros. The key thing is you don’t have to take the rate that is offered.”
Someone seeking to exchange €1,000 for the equivalent in Australian dollars would first check the interbank rate and then look at offers available from CurrencyFair account holders. Once the buyer finds a rate they are happy with, the exchange can occur. This tendering process means no one can get ripped off.
“If anyone tries to charge above the odds for their euros or whatever, they’ll never sell them. Only when they ask a fair price will they get to exchange.”
CurrencyFair approached Enterprise Ireland with the concept in September 2008, and has joined the agency’s High Potential Start-Up Programme. The company is regulated by the Irish Financial Regulator.
To comply with anti-money- laundering legislation, users must register using either a passport number or driver’s licence, banking details and a copy of a bill to prove residence.
CurrencyFair makes its profit from charging a commission built into the offer price. “Typically it is around €2,” Potter says, adding “a bank charge could be around €20”.
The company has an account with Bank of America to provide “liquidity” to the exchange, meaning in cases where more people want to buy euros at any given time than there are sellers, CurrencyFair will take the orders based on the current interbank rate. Trades are offered in 12 currencies, including euro, sterling, dollar, Australian dollar, South African Rand and Zloty. There is no upper or lower limit on trades.
The company became operational at the end of April and has already had a transaction of several hundred thousand euros. “That company saved thousands and thousands of euro compared with the best rate they would have got through their bank,” Potter says.
CurrencyFair’s target market is SMEs, expats sending money home on a regular basis and holiday goers. With offices in Dublin, London and Sydney, CurrencyFair’s next step is a Polish office and rollout of a pre-paid travel card which will allow holiday makers to spend in the currency of their destination.
Potter hopes first-mover advantage will give CurrencyFair a head-start over competitors. He expects the company to be profitable by the end of the year.
