TransferWise: limited, lacklustre and locked in to the State

TransferWise may or not be the next big thing, but as far as I can see their appeal is limited both in terms of who needs it, can use it, and the time it will take for them to be completely outflanked by superior services.

The VentureBeat press release:

http://venturebeat.com/2012/04/18/transferwise-undercuts-the-banks-with-crowdsourced-currency-exchange/

says “Banking is broken”; this is true, but what is needed to replace it is not ‘the AOL of banking transfers’; what is required is the open Internet of banking transfers, and that means Bitcoin.

Back before the internet permeated every home, AOL was the main way millions got online and used email. It was the consumer method of getting online. Anyone who knew anything about how the net really worked understood that AOL was garbage, and not the true internet. Similarly, anyone who had a friend that needed to get their contacts list out of AOL Messenger knew what a jail and walled garden it was. TransferWise is the AOL of money transfers. and I predict that it will end up just like AOL, even if it becomes massively popular for a short time.

TransferWise suffers from several problems. First, it is under complete control of the State. Look at its boast of full integration with the UK regulatory bodies. This means that all transactions are subject to complete surveillance and control. Secondly, you have to have an account with them, accessed via your Gmail or Yahoo account. This means they control your money, who you can send it to, how much you can send, when you can send it, what forms it can take, and everything else to do with your money, and they know your email address, which they are obliged to share with the authorities on demand. They also see the real identities both sides of all transfers, and keep records of them.You cannot use their system to integrate with other websites. For millions who do not know it yet, all of these failings are deal breakers, and you can forget about using TransferWise if you are unbanked.

Bitcoin allows you to send any amount of money to any person anywhere for a fee that is near zero. This is true for everyone everywhere, banked or unbanked. Compare and contrast with TransferWise, where it costs one pound to send any amount up to 300 pounds. With Bitcoin there are no controls, no restraints and when you get your Bitcoins, you can spend them anywhere on anything you like. You do not have to identify yourself to anyone to send and receive them. This is superior to all existing international money transfer services by orders of magnitude.

You cannot use TransferWise if you reside outside of the European Economic Area. Yes, you read that right. You cannot use cash as a way of depositing into their system, and you must have a bank account. You never transfer money directly to other users. You always transact with Exchange Solutions Ltd, the company behind TransferWise. This is a centralized exchange on the internet, nothing more. It is not new, or disruptive or innovative.

Banking does not ‘need to be democratized’. Banking needs to be decentralized and entirely removed from the power of the State and its insane regulations. The same goes for simple money transfer. The winner in this space is going to be Bitcoin, because it moves the power to send money down to the level of the individual, eliminating the need for any third party or institution.

Skype was a great innovation because it took the PSTN system out of the equation to make a phone call and reduced the cost of calls to zero. Transferwise, despite it being founded by someone involved with the creation of Skype, is not a disruptive, disintermediating peer to peer money transfer applicaiton that anyone can dowonload and start using – like Bitcoin – it is a centralized, shackled, State sanctioned, regulated and monitored intermediary – ‘Western Union 2.0’.

I have a strong feeling that if the founder of this service was not associated with Skype, they would not have recieved any funding or attention, but that is a side issue; this service is fundamentally flawed because it lacks disruptive potential and it is destined to be rapidly superseded by Bitcoin and the services that are being built upon it.

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