If all goes well, in a few months, United States citizens will be able to send and receive money overseas without getting fleeced.
At least, that is the pitch from TransferWise, an Estonia-based startup created by one of Skype's co-founders, Taavet Hinrikus. Hinrikus' partner, Kristo Käärmann, came to New York last week to start the process of making TransferWise available in the States. "States" is really the key word: The company must get permission from each of the 50 states before it will offer its service.
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Founded in 2010, TransferWise is available in much of Europe plus Australia, New Zealand and India, among other locations. The company uses crowdsourcing to let consumers avoid the fees — and, more importantly, the disadvantageous currency exchange rates — that banks charge.
Here's how it works: Say you want to wire a friend in Germany the equivalent of $500 in euros. You give TransferWise access to your bank account, and the company then withdraws $500 and holds the money. Meanwhile, in Germany, if someone else is trying to send $500 the other way, TransferWise takes that money and gives it to your friend. Then, it dispenses your $500 in U.S. currency to the intended recipient of the German customer.
The video below explains the process further:

Käärmann says the customer is only dimly aware of TransferWise's crowdsourcing aspect. For most, the important element is that the money is guaranteed, and that the process is cheaper; TransferWise charges £1 or €1 for a transaction up to £200 or €200 and takes a fee of 0.5% of the amount beyond that. TransferWise also claims its exchange rates are honest. Käärmann, a former exec at Deloitte and PricewaterhouseCoopers, says banks' exchange rates for such transactions are often about 3% off the actual rate.
The idea — and the Skype pedigree — has caught the attention of some top investors, including Peter Thiel and PayPal founder Max Levchin. Thiel's Valar Ventures led a $6 million series A round of funding in May.
Käärmann says that 10% to 15% of people send money abroad at least once a year. However, TransferWise isn't going for all those transactions. Käärmann says he's willing to cede some of the market to Western Union.
"They're known for being able to send money to Nigeria by saying, 'Send it to the blue hut,' and they do it," Käärmann says.
Image: Getty, Thomas Coex