Incumbent banks: startups are coming for you

July 7, 2017

In my previous post I wrote about the sparsity of financial services and products from incumbent banks for small businesses that act globally. This chasm has grown as the increasing proliferation of globally-minded startups face a retail banking sector that is stagnating for reasons of inflexible business models, obsolete systems, and corporate inertia.

Fortunately for SMEs, a handful of disruptive fintech startups have recently started honing in on this very problem. Given that fintech is one of our fund’s core investment areas, and I write occasionally on this blog about the various European or Japanese startups in fintech, I thought it might be interesting to recount my first-hand experiences as a customer of some of these fintech disruptors.

Of the wide array of fintech startups and alternative money transfer providers, I have direct experience with the following: CurrencyFair, Revolut, TransferWise, and OFX. The first three are pure technology players, whereas OFX, formerly called UK Forex or US Forex, is an Australian-based online international money transfer service.


I’ll start with CurrencyFair, which technically should be excluded from this list because CurrencyFair does not offer business accounts to U.S. legal entities. This is regrettable because CurrencyFair is unique in offering a currency conversion feature which I really appreciate: specifically, the ability to create an open exchange order with your own bid or ask price, even one that is out of the money. I enjoy using CurrencyFair as a consumer and look forward to the day they open up business accounts for U.S. entities.


UK-based Revolut has also just announced a business account, yet similarly does not yet accept U.S. entities. However, I understand that they will do so around the end of this year. Revolut conveniently offers a multi currency debit card, which is very handy when traveling abroad for use at ATMs or point-of-sale locations. Revolut charges a monthly fee ranging from £25.00 – £1,000 for its business account services.


The service I used most frequently over the past two years for international money transfers was OFX. OFX is technically not a fintech startup but a service that offers foreign currency exchange rates which are more transparent and competitive than those of incumbent banks. Unfortunately, OFX’s rules are difficult to navigate, and each transaction typically requires human intervention. Surprisingly, after 20 approved transactions, another OFX employee informed me that her colleague had violated the company’s compliance by approving my transactions based on a spuriously shifting definition of the term “third party transfer.” I no longer feel comfortable using OFX and cannot endorse their service at this time.


Which brings me to my final candidate: TransferWise. Only a few short months ago, TransferWise launched its Borderless Account product for small businesses. It’s still early days, so I will try to control my enthusiasm, but my initial experience with the Borderless Account is nothing short of euphoria! U.S. legal entities are eligible, and the product supports foreign currency transfers to over 60 countries. TransferWise offers its Borderless Account to businesses for free, and generates revenue in the form of a transparent fee upon currency exchange or money transfer. The company did not ask me to sing their praises; I’m merely a delighted customer acting on my own initiative. [For what it’s worth, here is my TransferWise referral link. I understand that using this link would grant you a free transfer up to £500.]

There may well exist other innovative financial services, for startups by startups, which have not yet come onto my radar. I welcome hearing about anything I’ve missed and will gladly try them.


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posted in technology, venture capital by mark bivens

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