Faster, better, cheaper: Fintech is changing the way we transfer money abroad

Czech players in the financial technlogy space are helping to drastically reduce the exchange rate.

Raymond Johnston

Written by Raymond Johnston Published on 25.11.2020 11:01:00 (updated on 25.11.2020) Reading time: 3 minutes

Banking has seen a wave of innovations in recent years due to the rise of the financial technologies sector, or fintech. Fintech has created more options for international payments, making it possible to save substantial amounts of money in fees by circumventing traditional banks when exchanging currency.

Matěj Novák, a member of the board of directors of the Czech Fintech Association, said that rates for currency exchange can vary widely depending on whether a bank or a fintech firm handles the transaction.

Novák said that classic banks make settlement payments through so-called correspondent banks with each bank adding its own fee along the way, which can significantly increase the price of the entire transaction.

“Nowadays, for example, you no longer pay a fee for payment in the eurozone, however the fee is hidden in the exchange rate, which is on average around 2–3 percent of the market exchange rate between banks,” he said.

Modern fintech companies operate differently. They open an account in a local country, the United Kingdom for instance, and obtain a remittance license issued by a local regulator. Their collection accounts are open in various countries so they don't need to send money across borders, only clear the balance on those accounts.

“This speeds up the entire payment system but also makes it significantly cheaper. And such payment services are free of charge, so you can achieve up to a 0.25 percent difference in exchange rate compared to the market rate,” Novák said.

Accessiblity is another benefit of using fintech innovations, he added, saying that in today's tech-savvy world clients need everything available online and non-stop, and that fintech systems, unlike traditional banks, are designed to accomodate these needs. 

In the Czech money transfer space, one leading company is EasyChange which joined the Czech Fintech Association in 2018. Founded in 2010, the year the European Union made it easier to obtain a payment institution's license, it obtained a license from the Czech National Bank (ČNB) to start operations in the Czech Republic. The platform is also represented in Slovakia, Germany and the United Kingdom.

In April 2019, EasyChange obtained a higher level of license from the ČNB, moving from a small-scale payment service provider to the Payment Institutions category. It is now one of the few non-banking entities providing payment services in the Czech Republic. In September 2019, the company extended the registration of its Payment Institution license with the national banks of all EU countries.  

Today EasyChange uses its own smart software design to offer cashless conversion of selected foreign currencies into Czech crowns and back between clients’ own bank accounts. The service is meant for long-term clients who regularly exchange large amounts of money. Companies and private individuals or associations can use the service. handles transactions in Czech crowns, euros, US dollars, and British pounds.

Novák breaks down the numbers here, to illustrate the savings between companies like EasyChange vs. classic banks (see table below); buying EUR 4,000 in mid October through some of the major Czech banks would have cost over CZK 112,300. The same transaction with would have cost CZK 109,372 a savings of almost CZK 3,000 (market mid rate: 27.27 CZK/EUR).

COST OF BUYING EUR 4,000 (market mid rate: 27.27 CZK/EUR)

Bank/RemittanceF/X RateService Fee (percent)Pay in CZK
ČSOB28.096112 384
KB28.093112 372
ČS 28.075112 300
Revolut (UK)0.5109 625
Transferwise0.4109 516
EasyChange0.25109 372

Consumers tend to be cautious, especially when it comes to baking security. However, fintech companies are regulated in the same way as banks, said Novák with clients going through the same registration and verification process when making transactions.

In the Czech Republic the legal framework for providing these services is primarily the Civil Code, the Payment System Act as well as a number of laws related to regulated activities in this field.

You can read more about and compare rates on the company's website. Learn more about fintech sector in the Czech Republic via the Czech Fintech Association.

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