How does someone like Tranzfers.com work/make money?

KalleAnka

Hi,

I was reading the foreign currency transfer section on the website and it occurred to me that I don't really understand how someone like Tranzfers.com makes their money so I was hoping someone on this board could help me understand it.

For example, I want to transfer £500 from the U.K. to Germany

1) I transfer money from my bank account in the U.K. to the Tranzfers.com bank account in the U.K. (e.g. NatWest -> Barclays)
2) I lock in an exchange rate of say 1.4 Eur to £ + £7 fee
3) Tranzfers.com proceed to transfer the money from their U.K. account to their German bank account denominated in Euros, they pay the bank exchange rate (also 1.4?) + the SWIFT transfer fee (£20?)
4) Tranzfers.com transfer euros from their account into my euro denominated account in Germany

I'm obviously missing the step where they make the money.
Do they pay the SWIFT transfer fee when transferring the money UK -> Germany?
Do they get a discounted rate?
At which point in the process do Tranzfers.com apply their "discounted" exchange rate?
I read on their FAQ that thei rates "are between the rates offered by the banks and the interbank rate (the wholesale rate amongst banks when dealing in packages of $5 to $10 million)". Do they buy currencies wholesale every time I make £500 international transfer?

Obviously I'm missing something, or many somethings about how this process works. Any help understanding this process would be greatly appreciated!

/Kalle

NFH

KalleAnka wrote: »

3) Tranzfers.com proceed to transfer the money from their U.K. account to their German bank account denominated in Euros, they pay the bank exchange rate (also 1.4?) + the SWIFT transfer fee (£20?)

Do they pay the SWIFT transfer fee when transferring the money UK -> Germany?

No, there would be no transfer from the UK to Germany. You pay the GBP from your UK account to theirs. They pay the EUR goes from their Eurozone account to yours. No GBP or EUR crosses borders.

KalleAnka

NFH wrote: »

No, there would be no transfer from the UK to Germany. You pay the GBP from your UK account to theirs. They pay the EUR goes from their Eurozone account to yours. No GBP or EUR crosses borders.

I see. So the only international money transfer the company itself would make would be to "top up" one of their own local accounts? For example if there were only transactions from GBP -> EUR but no transactions from EUR -> GBP?

Nukumai

In most cases, a financial institution (notably a bank) does not transfer anything. They instruct their local agent bank (their nostro) to pay the intended recipient on their behalf, and this is effected by way of accounting entries on the nostro's and initiator's books. The initiating bank either operates within defined credit limits with the nostro (like an overdraft...for which it is likely to be charged a facility fee) or will already have the required funds to his credit at the nostro.

This is simplistic, and there are many variations of this.

The key thing is that financial institutions are able to transact currency at wholesale rates and are not subject to anywhere near the transaction fees/costs that the general public would be faced with.

NFH

KalleAnka wrote: »

I see. So the only international money transfer the company itself would make would be to "top up" one of their own local accounts? For example if there were only transactions from GBP -> EUR but no transactions from EUR -> GBP?

There is no international money transfer. GBP stays in the UK and EUR stays in the Eurozone. Two counterparties exchange EUR and GBP, whereby one pays EUR to the other and one pays GBP to the other.

san004

Hi there,

Apologies for the somewhat late response, but I only came across this post now!

Tranzfers converts your funds on arrival into our bank account and we take what’s called a ‘margin’ - which is actually a percentage off the ‘interbank’ or ‘wholesale’ rate.

This margin or percentage is dependent on the amount you are transferring. The banks and other providers also take a margin or percentage, however, Tranzfers is committed to being as competitive as possible, therefore always offering good rates.

Unlike banks, we cannot offer credit cards or open bank accounts etc. and focus only on foreign exchange - another reason why providers like us can offer better rates.

I hope this helps. Please let me know if you have any further questions!

Cheers,
Sandra
Social Media Manager
Tranzfers