Traditionally people who want to send money abroad or convert money from one currency to another must use either a high street bank or a dedicated foreign currency broker. The fee structures and exchange rates offered by banks and brokers can be confusing, and in many cases they charge both a commission or change fee and a percentage of the amount that you are exchanging. Over the course of several foreign currency exchanges, these fees can quickly mount up.
If you want to make a large number of foreign currency trades, one of the new P2P currency brokers could be a good option for you. Instead of dealing with a broker, you make trades at the midpoint of the current interbank buy and sell rates. The money that you trade goes directly to another normal person, instead of into the pockets of a bank or broker.
Save money on your trades
Of course, even peer to peer currency trading companies need to make money, and they do this by charging a flat amount of money for each transaction, using a scale depending on the value of the transaction. This scale means that people who need to change a large amount of money into a foreign currency are likely to save a lot of money by using a P2P broker.
Other forms of P2P trading
Peer to peer currency exchanges are not the only form of peer to peer system that operates in the financial sector today. In addition to peer to peer currency trading, there are also completely decentralised currency systems. The most famous of those systems is Bitcoin – what is a bitcoin? It is a digital currency that is completely de-centralised. Bitcoins are ‘mined’ using complex computer algorithms, and they are stored in digital wallets on the owner’s computer. If you lose your wallet, you lose the money in it, just like you would in real life.
Bitcoins can be sent anonymously between users of the system and are untraceable. This means that governments around the world are suspicious of the currency because it makes it relatively easy to avoid taxes. Some criminals have turned to using Bitcoins for large transactions, or for the buying and selling of illicit goods. However, there are many people that use Bitcoin for legal and ethical purposes. The currency was invented in 2009, and has exploded in popularity since then. It is used by open source companies and even charities, as well as people who are unable to obtain traditional credit or debit cards.
Another relatively new form of online trading is crowdsourced lending. Instead of borrowing from a traditional bank or building society, you can now borrow from groups of people, and pay the loan and the interest back to them. Essentially, the people you borrow from are investing in you. This form of lending allows people who would not be able to get credit from traditional lenders to access funding, and offers good returns, in general, for the people who are willing to invest as lenders too.