In 2005, just a year out of university, Paresh Davdra began working on a financial technology project based out of Brighton on the south coast of England with his partner Rajesh Agrawal, now deputy mayor of London for business. Their idea was to come up with a way to help people save money on international bank transfers. While it sounds commonplace now, with the array of online payment services the average consumer can choose from, the concept at the time was something fairly revolutionary. The product of Mr Dravda and Mr Agrawal’s work was RationalFX, the UK’s first online foreign exchange service. “I was 24 years old and thought that in six months I was going to be a millionaire,” Mr Davdra tells fDi, laughing. “I quickly learned it is much more complicated than that!”

When the two entrepreneurs launched RationalFX, there were no apps and no smartphones, and for money transfers the norm was still to go to the bank, lose money on the exchange rate, and pay a transfer fee. “Our objective was to try to save people money,” says Mr Davdra.

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In the early days of the business, the focus was on helping private customers buy properties abroad. “You would have your banks transfer the money and impose their huge charges – we found that by negotiating with the banks we could agree on getting better exchange rates by promising them a volume of currency every year,” he says. “In our first year, we were aiming to transfer $100m. We would take a small margin for ourselves and pass that price benefit to our customers.”

Top volume

Today, the company, of which Mr Davdra is CEO, has transferred more than $10bn in payments in 51 different currencies, served more than 80,000 private clients and business customers in 60 markets, and is set to turn over $2.6bn. Its new headquarters in London’s Canary Wharf employs nearly 100 people from a range of nationalities.    

“On average we save our customers between 3% and 6%, and our volume last year was just shy of $2.5bn,” says Mr Davdra. When RationalFX first began serving private clients with its new online transfer platform in 2005, “it was a big deal” he says, “no one knew how it was going to be.” The company also began serving business clients who needed to import products from overseas – 70% of its revenue now comes from businesses.

“You would use our services instead of your bank because it’s cheaper, quicker and we offer a hand-holding service with strategy advice and tools to help you save your money,” says Mr Davdra. “By building relationships and growing our services, as well as expanding into Europe, we were able to build on our success.” In fact, he notes, RationalFX is the only privately owned payments and foreign exchange company in France offering those services to business clients.

Making a difference

Asked about his vision for RationalFX and if it operates by any guiding values, Mr Davdra pays tribute to the ideas on which the company was founded 11 years ago. “We still deliver the same values and principles to our customers that we had in 2005. It’s about more than just making money,” he says. “It’s about making a difference, contributing to the business community, and staying innovative. Because we’ve stayed private, we have been able to hold onto all our original principles.”

Nevertheless, RationalFX has mixed ratings on the customer side. The company handles a relatively small number of transfers per year compared with competitors such as Currencies Direct, which manages about $5bn-worth of transfers annually. Reviews platform Trustpilot.com gives it a ranking of 8.5 out of 10 – good, but still far from the 9.9 customers awarded transfer service Currency Solutions, for example. Independent ratings site Moneytransfercomparison.com gives it a 60.1% rating overall, placing it 26th out of 38 companies reviewed, after noting that 10% of client reviews for RationalFX were negative and referred specifically to issues with customer service or transfer problems.

Free transfer

If anything, however, the company is continuously working to improve and innovate. One example is sister company Xendpay, dubbed the world’s first free money transfer service, which specialises in the remittance market. Founded by Mr Davdra and Mr Agrawal in 2012 and supported by Wikipedia founder Jimmy Wales, Xendpay introduced an entirely new concept to online payments: the ‘pay what you want’ model.

“With us, businesses and individuals can transfer up to £4000 [$5255] for free,” says Mr Davdra. “We suggest a small fee at the end of each transaction that we think is fair, but the power is in your hands and you can pay zero if you like.”

As it turns out, 90% of customers do pay the suggested fee, which helps Xendpay cover its costs. The company predicts that this model will save its costumers $100m in fees over the next five years. Xendpay has also relaunched a revamped iPhone app, and an Android app is in progress.

“Effectively we’re doing this for the community,” says Mr Davdra. “This is really helpful for small businesses transferring money abroad. We were once a small business, and we know how difficult it is to negotiate with banks when just starting out. That is when businesses need the most help. If we’re adding value to a company when they are just starting out, they’re more likely to stay loyal to us when they become bigger.” 

Brexit worries

Having survived the 2008 financial crisis, Mr Davdra says RationalFX now faces another challenge: Brexit. His companies use their Financial Conduct Authority licences to 'passport' into other EU countries, allowing them to trade freely with people and companies in Europe.

“Not being part of the EU we face uncertainty about how that is going to be managed,” he says. “Thousands of companies are facing the same thing. As an entrepreneur, I’m an optimist and think that where there’s a will there’s a way. I believe we will find a way, but it’s going to be challenging.” Then he pauses, adding: “But if life weren’t challenging, it wouldn’t be fun.”