Those fees soar at airport currency exchange counters.
A new Goldman-Barclays app that uses the Bitcoin blockchain algorithm may reduce or eliminate those exchange fees.
When that happens, currency exchange counters, now common all over Europe will soon vanish.
Barclays is linking up with Circle Internet Financial, a US mobile payment start-up backed by Goldman Sachs that uses bitcoin to transfer central bank currencies, as digital money increasingly moves into mainstream finance.
It is the first time a European bank has allowed a digital currency company to use its infrastructure — enabling it to transfer sterling and euros — according to the two companies.
Boston-based Circle, which is valued at $250m, is expanding into Europe after launching a dollar transfer service for US users late last year.
From Wednesday the payment app — which transfers dollars by first converting them to bitcoin — will also be able to transmit sterling between users of the app by linking to their debit cards.
The tie-up with Barclays means Circle will be able to move sterling across the blockchain — a public ledger where bitcoin transactions are verified and recorded.
Users will be able to exchange sterling and dollars immediately and free of charge.
Barclays said it was interested in “accelerating positive uses of blockchain”.
Using the blockchain means that money can be exchanged without using a bank clearing system.
Euros, Yen, Yuan Coming Up
Jeremy Allaire, CEO and founder of Circle, said the app would add euros “in coming months”, and had plans to add Asian currencies in the future.
Allaire claims blockchain will disrupt the mobile payments industry, calling it a “blank slate” for innovators.
“Payments are the next thing to be commoditised as a free service,” said Allaire.
The only thing I cannot figure out is why there needs to be an exchange to Bitcoin to go from dollars to the British Pound. Whatever the current reason, I expect that necessity will vanish.
If not, Bitcoin, will take off as a widely used currency for international use.
Free Payment Services?
The Apps have arrived, but they will be as free as the “free” ATMs we once knew.
There will be fees. Over time, those fees will escalate.
Exploring the Good Side
The good side is competition rates to keep the fees lower than credit cards currently charge on foreign transactions, and certainly way lower than currency exchanges charge for swapping cash.
Currency exchanges will soon vanish completely.
Exploring the Downside
The downside is the inevitable march towards digital currencies with governments tracking every penny you have and how you spend it.
And when the conversion to digital currencies is complete, central banks will have free rein on imposing whatever negative interest rate schemes they so desire.
“Free” won’t be “free” the way this will be implemented.
Mike “Mish” Shedlock