P2P money transfer how it works Over the course of my career, I found myself having to send money overseas to businesses I’ve hired for outsourcing. I didn’t really think about the most cost-effective way to transfer money internationally. That was until I realized that a lot of money went to middlemen. After some research, I discovered peer-to-peer transfers. Since then, there was no turning back.

P2P money transfers have increased in popularity over the past few years. More people realize that they banks and brokers aren’t their only options when it comes to transferring money overseas. And the primary driving factor for the shift is the noticeable savings compared to more traditional methods of sending money abroad.

How Does Peer-To-Peer Transfer Work?

I found it surprising that the peer-to-peer system was first introduced in the foreign exchange market back in 1999. It provided a revolutionary way of trading foreign currencies, making all transactions fair and transparent.

The concept behind the system is very simple. Peer-to-peer money transfer companies match individuals and businesses with other people who want to exchange currencies. You simply need to choose a P2P money transfer platform, register for an account, and start transacting with other users. The service provider charges a flat fee for every exchange, which is considerably lower compared to what traditional banks or brokers ask for.

To make things a little bit clearer, consider this example:

  • I want to send $1,000 to my cousin, Mark, in Australia. One the other hand, you want to send $1,000 worth of Australian dollars to your cousin, Jane, in the US.
  • If we are all participants of the same P2P money transfer platform, the system can match us and help iron out the details of the transaction. Essentially, I give $1,000 worth of Australian dollars to Jane while Mark receives $1,000 from you. The platform basically serves as a means of improving liquidity.

What Are The Benefits Of P2P Payment Systems?

The primary advantage to using a P2P payment system is the amount of money you can save, especially if you find yourself sending money overseas often. These platforms can offer better exchange rates with very low transfer fees.

The reason why peer-to-peer money transfers are considerably cheaper is because all transactions do away with the “spread or margin” component. There’s no need to hire brokers or middlemen. While the flat fee imposed by P2P companies varies depending on the amount you need to transfer, you can still expect to pay less money compared to banks.

Another benefit is that your international transfer may get through sooner than it would had you opted to use your domestic bank. This is because the P2P money transfer companies bypass the international banking payment system.

It’s now easier than ever to transfer money overseas without dealing with absurdly high fees. By exploring options other than your local bank, it’s possible to save a lot of money without compromising the speed of your transfers. Just make sure that you compare multiple peer-to-peer money transfer providers and check not only their exchange rates but also their transfer fees, transfer time, and global reach.

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Categories: Money Transfers

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