[rahimnathwani]

They don't need to 'match up' individual transactions.

As long as they have a decent float in a bank account in each country, they can just do frequent (daily? hourly?) forex transactions to balance their reserves between countries.

At their scale, if the total amount sent by customers is X, then they probably transact 0.2X in the Forex market.

The frequency of the forex transactions will of course affect costs and exposure. Too frequent would increase transaction costs. Too infrequent and you risk exchange rates moving against you. Too infrequent and you need to hold more money in popular destination countries.

[konschubert]

I hope I’m wrong because I want them to be successful but I’m less optimistic about the optimization potential.

I’d say that they are probably transacting 0.9X or something in that range.

Reason being that, I suspect, a lot of their transfer flow is from richer countries to poorer countries, as payments for services.

Of course that money flows back at some point, but as payments for goods shipped, which typically doesn’t happen through transfer wise.

[rahimnathwani]

You are right. 0.2X is reasonable for a transfer company with a more general audience.

I wonder what % of their total transaction costs are from FX spread and fees. Maybe, even at 0.9X, total transaction costs are dominated by local bank transfer fees.