TransferWise: algorithms styling new styles of international money exchange

TransferWise is a peer-to-peer money transfer service launched in 2011 by two Estonians, Kristo Käärmann and Taavet Hinrikus. They claim that their online platform is a more efficient way to convert money to send abroad, because instead of making one international bank transfer with high fees, their service makes two local transfers at a lower cost. For example, if you want to convert pounds to euros, you can send your pounds to TransferWise’s sterling account in the UK, and then TransferWise will send the money out in euros from its euro account. Therefore, the money does not actually travel internationally. In the founders’ opinion, TransferWise challenges the banking system, which often charges huge fees when you convert money to other currencies, and that hides more fees in unfair exchange rates. Instead, they say TransferWise can bypass international transfer fees and make money transfers transparent and fair: the price is transparent, the exchange rate is the real one, the small fee is clear, and the cost is up to eight times less than what banks charge (TransferWise website).

TransferWise converts the money through a process of member matching. If you need to convert pounds to euros, and there are other people who want to convert euros to pounds, TransferWise’s algorithms will match your pounds with their euros. This keeps the bank transfers local using the current mid-market rate without any additional banking fees (TransferWise website). Algorithms in TransferWise’s infrastructure are key, as they allow for different people who need to transfer money between countries to be matched in a cheaper way to a normal bank transfer. Thus, these algorithms make it possible to challenge and to reconfigure the way the international money exchange system normally works: they are transforming the rules of the game, providing people with new channels and options for transferring money. In my opinion TransferWise’s algorithms are an example of what Wilf defines as “styling styles” (2013: 728): they have created a new style of money exchange that challenges traditional established ones, and that is having repercussions on thousands of users’ behaviours.

However, practices of styling styles have restraints too, and some restraints are constituted by the same technology involved in these practices (2013: 728). For example, although TransferWise claims to work differently than normal banks, it has made partnerships with them in order to improve their infrastructure, as well as make their service more efficient. However, for this reason it has also been accused of appearing more like a normal bank. Speed and money availability can also be other limiting factors in this alternative money transfer system: whilst transfers are quick in European countries, transfers involving poorer countries can take a few days, or may not even be possible, if there is not enough money available to make the exchange happen. In this sense, TransferWise does not seem to be so democratic and egalitarian in the end, while instead it can end up remarking economic differences between rich and poor countries.

 

References

What is Transferwise (2017) Accessed on February 22, 2017, from (https://transferwise.com/help/article/1567514/good-to-know/what-is-transferwise).

Member Matching (2017) Accessed on February 22, 2017, from (https://transferwise.com/help/article/1570199/good-to-know/member-matching)

Fintech: How TransferWise Disrupts International Payments (2016) Accessed on February 22, 2017 from https://medium.com/smartup-io-the-ultimate-founder-guide/fintech-how-transferwise-disrupts-international-payments-5dbf8e50b213#.knfdpcp3i

Wilf, E. (2013). Toward an Anthropology of Computer-Mediated, Algorithmic Forms of Sociality. Current Anthropology, 54(6), 716-739.

 

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