"The company says it is always improving the software that automates the matching process, including complicated solutions that cover, say, a pound-to-dollar transaction with multiple dollar-to-euro and euro-to-pound swaps. If TransferWise can’t find a match, it becomes a market maker, using its own money to complete the deal in the hope that another customer who wants to send at least as much money the opposite way comes along later. In doing so, it is essentially acting just like a traditional foreign exchange broker."
And this is how it spectacularly imploded 5 years from now.
Yeah this caught my eye as well... seems like an extraordinary increase in risk for a relatively small gain, not to mention the other costs of changing your business model from a glorified escrow service to an investment bank.
I hope for their sake they have someone who knows what they're doing running that department and hedging appropriately...
Heh, that reminds me of Yaron Minsky's talk about Caml, in which he stresses the need for absolute correctness of software when you are a market maker or arbitrageur, at risk of your high-throughput trading engine going off the rails...
And this is how it spectacularly imploded 5 years from now.