TransferWise was founded in 2011 by two men from Estonia, Taavet Hinrikus and kristo käärmann. After meeting at a bar in London, they realized they were complaining about the same issue. Tavvet was being paid in Euro while living in London so he needed pounds to pay the rent and kristo got paid in pounds but he had a mortgage in Estonia and so he needed euros. They each had the currency that the other one needed. Since they both had bank accounts in London and Estonia, they decided to help each other and exchange the money between themselves skipping the banks, saving a lot of time and money. They realized that this method of depositing transferring money can be useful to many people and can save them money so they created a platform that would allow these types of transactions occur on a much larger scale and this is how TransferWise was born.
TransferWise had 7 funding rounds of a total funding of $688.3 m.
The rounds:
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Seed round in Apr 2012 of $1.3 m.
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Series A round in May 2013 of $6 m.
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Series B round in Jun 2014 of $25 m.
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Series C round in Jan 2015 of $58 m.
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Series D round in May 2016 of $26 m.
(Valuation of £1.1 b)
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Series E round in Nov 2017 of $280 m.
(Valuation of $1.6 b)
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Secondary round in May 2019 of $292 m.
Current valuation is $3.5 b.
They had many investors such as:
Sapphire Ventures, Andreessen Horowitz, Mitsui & Co, Richard Branson, Baillie Gifford, IVP (Institutional Venture Partners), Old Mutual Global Investors, World Innovation Lab, BlackRock, Lone Pine Capital, Lead Edge Capital and Vitruvian Partners.
TransferWise is a foreign exchange and money remittance company that targets a variety of people for instance, individuals living abroad, travelers and businesses that deal internationally.
TransferWise’s main goal is to make international money transfers cheap, transparent, fair, and simple. Until TransferWise came around, transferring money internationally was expensive, time-consuming, the rates and fees were unclear and in most cases, going to a physical location was necessary to receive money.
TransferWise charges a set percentage rate on a transaction which is clearly stated before you pay. The company uses the internationally recognized exchange rate at the time of payment, which can be easily verified by a quick internet search. The website and phone application are very straightforward, setting up an account is quick and connecting a bank account or credit card is seamless. Payments may take up to one day but may vary depending on the currencies exchanged this is significantly less than most of the other options which can take over three days.
TransferWise provides a mobile app that enables users to send money abroad at the real, current exchange rate and track transfers in their accounts. The market size for such a product was big to begin with and will only expand and continue to grow based on the fact that traveling is becoming cheaper and more accessible with time, businesses are expanding to the international market and more people live and/or study abroad. This may eventually become a necessity in almost every house.
They offer very low fees for wiring money internationally; they offer speed and convenience that banks don't offer.
TransferWise established bank accounts in many countries, this allows them to skip the international costly transaction by making two low-cost local transactions. This innovative method of transferring money makes this company more competitive against well-known banks. Revenues of a major bank are marginally impacted by the international transfers sector and don’t focus their efforts on competing in this area. The banks have loyal customers that might take a more expensive way to transfer money but TransferWise is looking to focus on international money transfers this way they can focus on making this service as efficient and profitable as possible.
TransferWise is a part of the payments/billing domain of the financial industry, we see a massive change in this domain. Over the past 10 years due to the advance of technologies online payments and transfers have become ubiquitous. This incentivized companies to invest in the research and development of profitable technologies. Many types of technologies focus on the ease of payment methods whether it be Google Chrome with storing credit card information, Apple with Apple Pay\Cash or Chase with Zelle (QuickPay). Another focus is the security part of payment methods, in the beginning people were reluctant to send money to others over the internet so companies focused on proving that their software won’t get hacked and now it's fair to say that online transactions are safe and secure.
Paying online allows performing routine tasks such as paying utilities and bank statements simpler. Paying bills online also has the benefit of immediate response, so if a bill is due on a specific day the payment can be made on the same day. With TransferWise an important tool has been added by allowing international payments through different currencies. This allows a user to be less likely to miss a payment due to logistical disadvantages.
Self-checkout is an important payment method in the retail market. Customers using the self-checkout booth can save large grocery or pharmacy chains significant costs for payroll and can give the customer a smoother experience by cutting down on wait times. A new type of payment system that is being implemented is one that Amazon is using in their Amazon GO stores, where the customer signs in to the Amazon phone app and enters the store with a QR code that allows them to take whatever they want and with new technology the app shows the receipt of what the customer bought. This new type of grocery store makes the payment phase of buying groceries feel almost non-existent, this may carry on to other types of retail markets as well.
Some of the other major companies in this domain are:
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Zelle is a United States-based digital payments network owned by Early Warning Services, a private financial services company owned by many of the large U.S banks.
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Apple Pay is a mobile payment and digital wallet service by Apple Inc. that allows users to make payments in person, in iOS apps, and on the web. It is supported by various Apple products.
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Azimo is a payment processing company that provides internet and mobile-based inter-country consumer money transfer services. Its solution allows users to send and request money domestically or across borders using a phone number.
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Payoneer is a provider of a cross-border payment platform for businesses and professionals. Its solutions enable users to receive payments from international marketplaces and networks directly to their account, access funds, withdraw them to a local bank account or at ATMs worldwide, make purchases online and in-store, and pay other Payoneer customers for free. The company serves freelancing, vacation rentals, stock photography, e-commerce, and online advertising markets.
TransferWise has made a big impact on the international transfers market. With a valuation of $3.5b it is hard to argue that this is a huge market. With its head start in this domaine TransferWise will continue to grow and more likely than not, remain people’s first choice of third-party app (People that don’t use their own bank for international transfers). TransferWise was initially intended for personal use and once they extended their service to include commercial use, they took became a very popular option for businesses to use.
Just like in any domain of business a few important metrics are revenue, net income and transactions. Specific to this domain important metrics are transaction volume, number of different currencies, and the number of countries operated in. TransferWise's Revenue is 179.1 million pounds which is significantly higher than the other start-up competitors. The net income of the company is 10.3 million pounds which puts it an average net income for a company like this even though the revenue is higher, this may be attributed to the fact that they are expanding rapidly and aggressively. The volume of transactions is 48 billion pounds annually which is an enormous amount. They have a lower than average amount of currencies and countries operated in. At the moment at only 49 different types of currencies is low other companies have up to 150 and the number of countries operated in is 70 which is also low compared to over 130 for competitors.
This graph clearly portrays how competitve TransferWise is.
TransferWise deals with international currencies and exchanges. This could be a great time for them to enter the international currency exchange market by creating an application that is similar to a stock market app like Robinhood or cryptocurrency app like Binance. By creating a market for currencies that is simple to use and used for the purpose of investing.
Another recommendation is that they should expand to more countries and have a wider range of currencies along with a variety of cryptocurrencies. This will help them enter the majority of the currency market and include people from all over the world.
As for now, you cannot schedule transfers with TransferWise, adding this feature will add a lot to the convince they are selling.
The technology used in transfering cryptocurrency will use blockchain technology. While the investing and trading currencies would use existing technology used by Robinhood and Binance, but would use them in a more specific way with a new innovative view on international currencies.
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