Borderless Account: How to Invest in European P2P Lending Without a European Bank Account

European Peer-to-Peer lending is booming. In recent years more and more platforms have sprung up all around the continent. Far most loans are in Euro (EUR), but what if you don’t have a Euro account?

Alternative financing – and crowdlending in particular – has gained significant traction all around the world. The concept of letting individuals combine their resources to finance loans to other individuals without involving the banks are appealing to many, regardless of location. From New Zealand through Indonesia to India individuals are borrowing and lending outside of the banking system.

Of course, the US also has a big market for P2P lending. But this market usually is only available to US residents. In addition returns form US crowdlending platforms are noticeably smaller than their European counterparts. Large US platforms such as Lending Club (4 – 6 % return) and Prosper (6.8 %) perform much below what we are used to on the Eastern side of the Atlantic. Although less volatile, these American platforms can not compete with average stock market returns.

At European platforms return rates are significantly higher. Here 10 – 13 % returns are expected rates. Unfortunately due to regulations US investors have very limited access to the European lending market. Bondora is one of the few platforms that invites US investors, provided they do the necessary paperwork.

However, most investors outside of the US can invest in at least some European platforms.

The UK in particular offers a lot of P2P platforms which could be attractive to international investors. Although they often require UK residency unlike many mainland European platforms, which  are much less strict in regards to residency. Often they are open for investors in some locations outside of Europe.

One of the platforms available to almost anyone around the world is Mintos – their list of available countries is very long. They do, however, require a bank account that adheres to EU regulation on money laundering.

But how do you invest with Euros if your bank account is in another currency? One solution is, of course, to make a EUR transfer from your local bank, but this it often quite costly. Regardless of whether you live in a European country with it’s own currency or you live in another continent, banks often charge very high fees for international money transfers.

This is where TransferWise Borderless account enters the alt-finance scene

With Borderless Account you can get bank accounts in EUR, GBP, USD and AUS with “bank details” included. I.E. an account number in your own name to which others can transfer money.

In other words, you can easily create an American, British, Australian and a German bank account in their respective currencies.

It is also possible to set up accounts in most other currencies. However, these don’t offer account details that you can share with others, so it’s only possible for you to transfer money to and from your own accounts.

With a Borderless Acccount you can transfer money to that account, convert it to the desired currency and sent it on to your crowdlending platform or your local bank.

Say you are from Russia and have a Russian bank account. You also have an investment account at Bondora and wish to send your investment funds there. You could pay your Russian bank to make a foreign transfer to Bondora, but that usually involves a hefty fee.

Instead you use your credit/debit card to add your funds to the Borderless account and then send it on to Bondora at minimal transaction costs.

Of course, with Transfer Wise you can also use other currencies than Euros. While many British crowdlending platforms require residency in Britain, some do only require a British bank account. With Borderless you can have that and thus get access to at least parts of the British loan market.

Receiving funds with Borderless Account

Getting paid from a foreign account in a foreign currency is often just as expensive and sending money. Whether you’re withdrawing crowdlending returns or getting paid for a product or a service, transaction costs often shave several percentages off of that hard earned money.

Since your Borderless account has valid account details, others can easily transfer money to you.

As a Dane, when I receive money in EUR, or GBP og USD I no longer provide my local bank account details, but rather the respective Borderless account number. Then I transfer the received amount to my DKK (Danish Kroner) Borderless Account and from there send it on to my local bank. TransferWise charges a small fee for that service, but I don’t have to pay my own bank’s huge fees.

Here is an example of my cost of transferring EUR 40 (about DKK 300) to my Danish account:

The old method: Transfer directly to the bank

• Sender transfers EUR 40
• My bank charges a EUR 0.4 exchange fee
• After that, the bank will charge a DKK 30 international transfers fee
• DKK 264.46 will be added to the account

The new method: TransferWise Borderless Account

• Sender transfers 40 EUR to my EUR Borderless account
• I move the money to my DKK Borderless Account: TransferWise charges a EUR 0.2 exchange fee (0.5%)
• I send the money to my local bank: TransferWise charges DKK 4,4 in transfer fees
• DKK 291.58 will be added to the account

Difference between ordinary bank transfer and the TransferWise method: DKK 27,12 (9,30%)!

Save further on international transfers

As exemplified above, it is often cheaper to receive even smaller amounts with Borderless Account than getting it directly to the local bank. In addition, as TransferWise transfers fees are a fixed amount, I can postpone the transfer until I have accumulated a larger total amount. This makes the fee significantly lower relative to the amount transferred.

Another advantage to Borderless is that I don’t have to pay exchange fees if I wish to spend the the same currency as I recieved.

For example, let’s say I receive a payment in EUR from a person or company in Germany. I do not need the money for private consumption, instead, they are to be invested in crowdlending.

Previously money received would be transferred directly to my local bank account and then exchanged back to EUR. But with Borderless Account, I can transfer the money directly to my investment account, which is usually in EUR. The only expense is the a EUR 0.60 transfer fee.

A borderless account for borderless people

When TransferWise introduced this service in 2017 it simplified my financial life.

Many of us do international transfers relatively often. Whether it’s for investment purposes, trade or extensive traveling, handling multiple currencies can be a hassle. At TransferWise Borderless account we can keep that money stored in one place and then easily exchange it to any currency at minimal costs.