Because of the 2008 financial crisis, the banking industry is not widely trusted in society. A traditional bank, as they say, will always lend you an umbrella, but they’ll want it back when it’s raining. The general public is most likely blissfully unaware of the amount of spread added by a traditional bank when exchanging currencies. Most people don’t send large amounts across borders, needing instead to change money only for holidays, or small purchases. Anyone who has emigrated to another country and used a traditional bank to quote the currency exchange rate will understand just how much the banks have been making.
Traditional banks advertise no-fee exchanges, but when it comes to the actual rate they offer you, well that’s another story.
So, how do the FinTech’s do it? How can they offer the retail investor, prices at or near the actual rate?
Think of it like this: They operate as a middleman between you and the interbank system.
The FinTech bank will have segregated client accounts in all the countries they offer exchange rates.
If you want to send euros to a friend in Germany from the UK, you send your British pounds to your FinTech bank in the UK, either by bank transfer or debit card. The FinTech bank then sends euros to your friend from their German bank account. The money you send, never actually crosses a border.
Remember the commercial intermediary bank relationship we discussed earlier — the system that’s used when sending an international money order through a traditional bank?
The FinTech bank is the equivalent of a commercial intermediary bank to a traditional bank, except this time the customer is you.
For a retail investor, moving money globally, was, until very recently, slow, inefficient and expensive, but now, due to disruptors like Ripple and FinTech banks, things are changing fast.
https://www.altcoinsidekick.com/blog/locked-and-loaded
