Online, peer-to-peer foreign exchange network CurrencyFair has raised its first $US2.5 million ($A2.6 million) from outside investors, after winning over “tens of thousands” of users from a starting point of one in 2010.
The business was incorporated in Ireland but founded by Australians Brett Meyers and Sean Barrett, with Brits Jonathan Potter and David Christian, in 2009.
Today’s funding round was led by Irish venture capital firm Frontline Ventures and a number of unnamed angel investors.
It adds to a total pool of $US4 million, including funds from Enterprise Ireland, family and friends, and leaves the founders with over 50% of equity in the company.
Barrett, Meyers and Potter had each spent about a decade working in the finance sector before starting CurrencyFair, and saw a business opportunity in slashing the costs involved in sending money overseas.
CurrencyFair now facilitates foreign exchange trades over 17 currencies either by matching up customers’ offers, or by offering an exchange rate itself through its agreements with banks.
The former service accounts for about a quarter of transaction volumes at the moment; CurrencyFair charges a commission of 0.15% of the amount matched plus a €3 ($A4.25) withdrawal fee.
The latter, called “QuickTrade”, has CurrencyFair acting as a more traditional FX brokerage like the recently listed OzForex, offering the intrabank rate plus about 0.5%. Barratt, a former foreign exchange dealer for Zurich Insurance, said banks typically charged retail customers the intrabank rate plus 4.5%.
CurrencyFair has a total of about 25 staff in Poland, Britain and Australia and bank accounts in almost all the countries it offers rates for. Customers deposit the money they want to exchange into those accounts, which Barrett said were kept separate from CurrencyFair’s own funds.
CurrencyFair is not an APRA-Authorised Deposit-Taking Institution but is regulated by ASIC and the Central Bank of Ireland as a money-remitting business. As such, it doesn’t seek to use or otherwise profit from the funds it holds worldwide on behalf of customers.
To date, the company has facilitated more than £500 million ($A845 million) in global transfers, including individual transfers as large as €2 million ($A2.84 million).
Barrett, who runs CurrencyFair’s Australian operations, told Business Insider that Frontline was attracted to the business after having used it as a customer.
Corporations like Frontline account for about 25% of the volume of money being exchanged through CurrencyFair at the moment. Barrett said CurrencyFair hoped to grow its corporate clientele as it expanded.
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