One of the most important things about managing your money is how much of it you have, and how much of whatever you want you get for it, and that couldn’t be more relevant in foreign exchange. If you are sending Sterling to Dollars, you want to know how many Dollars you get for your Pounds, but which provider gives you the most? I’ve said many times in the past, that for large currency transfers the most important question to ask is “what is the percentage mark-up” because no matter how many times you compare exchange rates the only thing that matters on the day is what the underlying rate is and what rate you get, it’s vital brokers are transparent about those costs. But, unfortunately, that is something that most people, just don’t get.

Fixed-fee currency transfers have never really been a thing because there is so much to be made through scaled markups, in that you don’t make much on small transactions, but make a lot on big ones. However, Atlantic Money says they aim to change that by offering GBPUSD transfers of up to £1m for a flat fee of £3. This is a bold move because to put that £3 in perspective, Wise (formally Transferwise), heralded as the game-changing low-cost money transfer service will charge you £2,792.28 (a mark up of 0.28%) for that transaction. 

We discussed on Zoom what prompted Neeraj Baid and Patrick Kavanagh to set up Atlantic Money, the best and worst parts of running the business, and how they plan to make money.

Why did you set up Atlantic Money?

NEERAJ BAID:     We’ve worked in fintech for a number of years together. We were at Robin Hood for about five and a half years before starting Atlantic. I was on the technical/product side; Patrick was doing business and operations. So we had quite a good breadth I think if you combine our backgrounds. We always loved building products – we built a bunch of products together at Robin Hood – and we knew that at some point that it would be exciting and something we enjoy to go build the new business together. So at eye level, building new products, is something we really enjoy and something we wanted to do at our own company. So we had the opportunity to do that and thought it was good timing to do that in late 2020. We were getting great feedback from a lot of founders and investors that we got to know during our time at the company that we might be able to go do something that we were pretty excited about.

We took that opportunity to go build this company. We didn’t know what we were going to build. We knew that in order to be market-leading, we had to be competing on value and we had to be competing on the customer experience, that was all we knew. From there, we followed a process of talking to customers, understanding the marketplace to find a gap, to find a place where we could do something that’s a lot better, by combining our product expertise and our business and financial expertise to deliver that. I think that’s what we ended up with.

I think we had a few observations going into the process, which is that there’s a trend of what we consider to be super apps, where you have a lot of different services combined under one umbrella. But what you typically see is that only one of those services is actually great. Other services are potentially not as great as the original service. So what we want to do is build focus products; products where we’re delivering one thing really well and we’re not muddying the waters of a bunch of other services. Atlantic, is a money transfer service that’s great at money transfers. Best in class for that, from a pricing perspective, and from an interface perspective, but not trying to combine in like ten other things to muddy that experience.

How did you get the business off the ground?

PATRICK KAVANAGH:     We did raise a pretty substantial amount of money for our seed round. We raised four and a half million dollars from a number of top VCs including, Ribbit Capital and Index Ventures. So people who are in the know about fintech and backing companies that could really do disruptive things. We raised that money to not only get our product out the door but also to have plenty of buffer in case we didn’t get it right the first time. I think it’s always a sweaty situation when you raise money for 12 to 18 months of runway and then you’re like running out of money right when the product’s coming out the door. That’s just not a situation we wanted to be in. So we optimised for that as well.

I’ll let Neer talk about the product and the engineering side.

NEERAJ BAID:     We’re building technology in-house. Our team’s got 14 people across operations and compliance but also across engineering and product design. We work with a number of global banking partners for payments and for currency conversion. That’s one of the things that we’re pretty excited about is bringing institutional pricing and currency, FX, directly to customers, without adding an FX markup or anything like that, and we’re doing that by working directly with those partners instead of going through five layers of intermediaries, which is something we’re pretty proud of. So yes, the technology’s built in-house and so is the product.

How do you make money?

NEERAJ BAID:     So to be clear, all the ways that we make money are explicit and shown to the customer as like an explicit fee. So we have obviously our base £3 flat fee – that’s what most people will end up paying. There’s also some stuff that we’ve heard from customers that I think is important. You can pay because you don’t want a fixed rate over the weekend. That not something we can cover with a £3 flat fee because the currency risk over multiple days is too much to flat fee. But the point is that all the ways that that customer will be paying us are all explicit to customers. So there’s nothing hidden in exchange rates. There’s no other way that we’re making money at the expense of customers. It’s all explicit.

What’s been the best bit about running the business so far?

NEERAJ BAID:     Well, I’m a product person and a technology person, and I love building stuff. To me, that’s what I really enjoy in my work, is being able to build products that I’m excited about, products that I know that customers are excited about. Getting on the phone and talking to a customer and having them tell you that the marketing page you put in front of them, they couldn’t believe it was true because it seemed so good. And obviously, it is true because that’s our job, but hearing someone that’s excited about a product and then being able to actually build and deliver it is an incredibly fulfilling use of my time, in my opinion. I feel incredibly fulfilled by that. So that’s a lot of fun. And working with a great team to do that is something I really enjoy.

PATRICK KAVANAGH:     I really like building teams. You move to a new place, you know a few people, right, but being able to actually build a platform of human beings around you who are really talented and really trying to do the same thing as you are, it’s just always a magical experience when you can get people to buy into something. I think getting that buy-in and building a team around it is just really fun and really rewarding.

What’s been the most challenging part of setting up Atlantic Money?

NEERAJ BAID:     I think the most challenging part is waiting for things that are out of your control. In finance and fintech, it’s a highly-regulated industry and the regulators, the FCA in the UK is a modern regulator, they’re great to work with, but every day you’re waiting is still painful as an entrepreneur. As an entrepreneur, you want your product in the hands of customers and whenever there are waits out of your control, that’s just unfortunate. So I would say that’s probably the hardest part.

PATRICK KAVANAGH: I think a downside is running a company is about a lot of things that you’re not excited about at the beginning, and you have to find excitement in them. Like you could be selling shoes or gasoline at a gas station. You can do a lot of things, but everyone always focuses on the product you’re delivering, like the thing that’s in the public eye, but I think it’s just really challenging to run businesses and it’s not something that, you know, you kind of take it for granted when you work for other companies that there’s so much that’s on rails for you. You’re just on rails. The company’s figured out 98% of your job and you just have to do the 2%, but you see the 2% as the 100%. So you’re like I’m doing a great job, but I think as soon as you have to build rails for other people and make sure that they’re really happy and successful and productive, it’s not honestly a downside but coming into that reality doesn’t feel very good because you kind of have to level up in order to really rise to that challenge, and the way that comes about is often through pain.

What’s the one bit of advice you would give to anyone sending money abroad?

NEERAJ BAID:     I think it’s important to just be aware, but I think one of the things that we’ve seen in retail FX forever is that the trust is not there with companies. Companies have been doing too much shady stuff for too long. You’ll see companies that will give you no fees and obviously, there’s a bunch of garbage in the exchange rate. Or they’ll tell you there’s a markup on the exchange rate and then they’ll also charge you a fee. There’s all kinds of nonsense that’s been going on in the industry forever. So the advice I would give a customer, a potential user of foreign exchange or money transfer services is be aware. Don’t believe what you’re hearing. Look at the numbers. And make an evaluation for yourself of what’s best.

PATRICK KAVANAGH:     I think that financial services are like water and everyone’s marking up different bottles of it. So you should treat everything as a commodity until you believe otherwise, and, you should be highly sceptical when anyone’s charging you anything in financial services, because there’s a million ways to make money on financial services, and usually, there’s a reason why bankers and people get paid so much money, is because they’re taking money out of your pockets. So I always like to think of finance as water, but you can put it in a £10 bottle, in a glass bottle, you can put it in 20 pence bottle, but it’s just water. That’s all it is.

Patrick Kavanagh and Neeraj Baid are co-founders of Atlantic Money

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