If you follow Fintech news, you will probably have heard the latest about Currencies Direct. The digital payments company recently completed a £165 million dividend recapitalisation, in a time when many similar companies were on the back foot. This news made significant waves in the international money transfer world. Here’s what you need to know.
Who is Currencies Direct?
Currencies Direct is a money transfer company started in the UK. Unlike the latest batch of money transfer companies, Currencies Direct started back in 1996. While longevity can be something of a disadvantage in the fintech space, the company has managed to adapt along the way, becoming as much a disruptor as any of the startups of the 2010s.
The progress of Currencies Direct was not always an upwards curve. They made their first transfer in 1996 and opened their first European branch three years on, but it was only in 2008 that they started their online service. Until then, they had been gradually expanding across the globe, becoming a big name but without the advantages of modern access to scale.
It was their online service that boosted their presence, bringing in customers from everywhere looking to carry out small transfers and big transfers alike.
The impact of online access to scale is not unique to Currencies Direct. Rather, it is indicative of the entire money transfer industry.
How the money transfer industry exploded
With international money transfers, there was always the possibility of some massive transactions. Investors would buy expensive properties overseas, while others would throw money into promising startups around the world. There were specific demographics who money transfer companies targeted, knowing that they were most likely to send and receive huge sums.
However, the modern success of the money transfer industry is not due to the investments of big businesses or wealthy entrepreneurs. Rather, it comes down to the millions of small transactions being completed every single day by individuals.
There is a reason that these transactions have multiplied to the extent that so many different companies could capitalise on the scale. The internet has opened the way for international ecommerce as well as remote working.
Small businesses everywhere need to receive money from abroad when making sales they previously could not have anticipated. This is even true of very local companies who offer niche services that may not be available elsewhere.
But it is in the freelance economy that the number of transactions has grown exponentially. There are now millions of freelancers in the UK alone. These freelancers are not limited to jobs in their own region, but can work for clients anywhere in the world. For this reason, they are regularly transferring money from other countries.
This is especially true in poorer countries, where people from the US, UK, and other first-world countries find remote workers willing to work for far below local minimum wage. A pound in the UK does not go nearly as far as a pound in the Philippines.
That said, it is not only in developing countries that freelancers are finding work across the globe. Many successful freelancers are earning six figures by finding high-paying clients among the millions constantly searching for skilled workers.
One of the first companies to really take notice of the increasing potential in the money transfer industry was Wise (formerly TransferWise). Wise was started by two friends who had personally struggled with receiving payments for work they had done abroad. They conceptualised Wise as an alternative to the big banks – one which did not charge exorbitant fees and which provided superior exchange rates.
Wise was so successful that they have now launched an IPO. They are currently worth approximately £8 billion.
The impact on Currencies Direct
Currencies Direct was founded a full fifteen years before Wise. When TransferWise came along, they were the disruptors of the industry in which Currencies Direct had been operating for ages. While Currencies Direct had already launched their online service, they were able to acknowledge what was going on in the industry and adapt to keep up. Palamon and Corsair acquired Currencies Direct in 2015, pushing them further into the modern fintech world.
Wise and similar countries had the advantage in the first few years, but now many experts consider Currencies Direct to be the best in the business. Currencies Direct is rated #1 on MTC.com, having taken over from the once-flashier startups.
All of this has led to the £165 million dividend recapitalisation. Since Palamon and Corsair took over six years ago, Currencies Direct has more than doubled its revenues and nearly tripled its EBITDA.
It is not only in taking advantage of the rise of the gig economy that Currencies Direct has become one of the best and biggest. The company has kept its fingers in every pie, recently signing an exclusive white label agreement with wealth management firm Hargreaves Lansdown. The firm has 1.5 million active clients and keeps Currencies Direct in the eye of investors across the board.
Ultimately, Currencies Direct has done an excellent job in not only staying relevant but expanding their offerings. Nonetheless, without the success of companies like Wise, Currencies Direct would likely not have achieved this scale of growth.
What’s next for Currencies Direct?
Currencies Direct is expected to remain at the top of the money transfer game. The digital payments company has been providing various services for twenty-five years, and has not let its maturity disadvantage it in competition with the startups of the 2010s.
Currencies Direct is now the first choice for many individuals and businesses. Since experts are calling it the best choice available in 2021, we can expect to see more success for the company in the future.