All You Need to Know About Peer-to-Peer Money Transfers

September 7, 2020

What is a peer-to-peer money transfer?

A peer-to-peer money transfer, also referred to as a peer-to-peer transaction, a P2P transfer, or a P2P payment, is basically an electronic fund transfer made by one person to another by using the services of an intermediary. You may carry out a typical P2P money transfer using an internet enabled computer or mobile device.

While traditional overseas money transfers depend on banks at both ends, peer-to-peer transfers give individuals and small to mid-sized businesses the opportunity to cut the middle man and generate savings.

TransferWise was among the pioneers of the peer-to-peer money transfer system, and some of the other prominent names that offer P2P payment solutions include CurrencyFair, Currencies Direct, Midpoint, and WeSwap.

How do peer-to-peer money transfers work?

Peer-to-peer money transfers work in matching people who wish to trade in different currencies with each other, giving both access to highly competitive exchange rates. You would have to start by registering with a money transfer company that provides P2P transfers, and then begin trading currencies with others who are part of the same marketplace. The company you select, in all likelihood, will charge a fee for its services.

Turning to a peer-to-peer money transfer company gives you the ability to send money to individuals and businesses alike. You may even transfer funds into your own bank account held in another country.

Carrying out a P2P transfer

The information you need to provide when initiating a P2P transfer includes the amount you wish to transfer and the destination country. You transfer the funds to your service provider, which then matches your transfer with a person who is sending money in the opposite direction. For instance, if you are sending money from the UK to the U.S., the company you select will try to match your transfer with a person sending money from the U.S. to the UK.

In case the company you select is unable to find a match for your transfer, it typically matches your transfer from the other end and provides its own exchange rate.

Pros and cons of peer-to-peer transfers

While peer-to-peer transfers give you the ability to get highly competitive rates, there are downsides you should know of too.


  • Possibility of getting better than existing market rates
  • Transfer fees typically lower when compared to banks
  • Quicker turnaround times than banks


  • Not all currencies supported through P2P networks
  • Time taken to finalize a trade can lead to a drop in the exchange rate
  • Currency rate fluctuations may lead to delayed processing because of blocked trades
  • An imbalance in buyers and sellers may lead to you not being able to transfer money when you want


Factors to Consider When Selecting a P2P Service Provider

If you plan to send money overseas through a peer-to-peer money transfer company, compare your alternatives across these parameters.

  • Cost effectiveness. While P2P transfers give you access to great exchange rates, make sure the company you select does not offset the same by charging steep fees. Transfer fees may vary depending on the amount you wish to send, the destination country, and the payment method.
  • Availability of currencies. Most companies that carry out P2P transfers deal in major currencies such as USD, CAD, GBP, EUR, AUD, and JPY. However, finding companies that deal in exotic currencies might be a problem.
  • Payment methods. Paying using a bank account transfer is among the most common method. Not all companies accept payments via debit and credit cards. Some, on the other hand, let you pay using methods such as BACS, CHAPs, SOFORT, and iDEAL.
  • Processing time. The processing time depends on how quickly a company is able to find a match for your transfer. Once that happens, most such transfers tend to process within one to two working days. Some companies provide expedited transfers for which you have to pay an added fee.
  • Holding funds. The company you select has a bearing on whether you may or may not hold funds in an online account. Some companies provide digital wallets where you may hold funds in multiple currencies for as long as you want.

No matter why you wish to send money overseas, keeping an eye on the costs associated with your transfer is important. Since peer-to-peer transfers give you the ability to save money, take some time to compare your alternatives well.