PayPal has announced its backing for TransferWise, a British start-up which aims to transform the way in which consumers and businesses exchange currencies.
The London based firm impressed PayPal’s co-founder, Peter Thiel, sufficiently for him to part with £3.9m for the firm – to finance an expansion of the service to mainland Europe.
Launched just two years ago the business enables people to bypass the interbank payments system by directly matching consumers and companies in one country with those in another who require each other’s currency.
To date the firm, founded by former Skype colleagues Taavet Hinrikus and Kristo Kaarmann, says it has transferred £125m saving its customers £5m in bank fees.
Thiel said: “Innovation in the banking industry typically involves rent-seeking or unsound derivatives, which offer marginal benefits to consumers. TransferWise demonstrates true innovation by enabling users to retain their wealth across borders, instead of paying big fees to big banks.
“We can do a lot for entrepreneurs running small companies. There’s a chronic lack of transparency [in bank transfers]. You have banks adding a three per cent mark up on the exchange rate and never telling you about it. That’s not how a modern institution should be treating customers."