Key Data

transferwiseCompany Name: Transferwise
Established: 2011
Ownership: Taavet Hinrikus and Kristo Käärmann (Founders), Venture Capital Firms, Angel Backers Like Peter Thiel and  Richard Branson
Status: Private But Might Float In 2016
Services : Online Money Transfer  (To Learn More View Money Transfer Service Guide)


Reliability Level: High

Transferwise has everything going for it in terms of reliability. Its pricing structure is clearer and more transparent than competitors. It has raised in excess of $100m in funding from some of the world’s most famous backers, and recently it has announced it is moving £500m making it larger than the vast majority of money transfer firms, let alone startups. 


Fees: Varies: £1-£3 Below £200, None Above + £10 Added For Exotic Destinations | Anticipated Spreads: 0.5% (Most Destinations) – 1.5% (India)

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TransferWise, City Road, London, UK,

Comparing Transferwise to Other Foreign Exchange

 Foreign-Exchange Company Payment OptionsFee Spread Structure Dedicated DealerUser ReviewsBottom Line
transferwiseFund via Domestic Bank Transfer or Debit Card, Receive into bank accountUp to £3 Per Transfer + £10 Exotic DestinationsFixed: 0.5% To Most Destinations But 1% to USA, 1.5% To IndiaGlowing.Great for sending small or large volumes volumes abroad
wfFund via Domestic Bank Transfer or Debit Card, Receive into bank accountFree From UK, $10 From USA Below $10,000Dependent on Volume and DesitnationDependent on DesitnationGlowing.Great for sending amounts of £1,000 or more
westernunion logoFund via Domestic Bank Transfer, Debit Card, or in Cash in branch, Receive into bank account, or withdraw in cash from branchUp to $10 Fee Online, Higher Fees in BranchesDependent on Volume and Destination and Delivery✓(Website/ Telephone)Very Poor.Not recommended, especially cash to cash transfers in branches

 

Transferwise Company Analysis

Overview

As one of the newest Forex transfer companies, Transferwise started off disrupting the banking sector with its new approaches and cutting edge technology. Rather than adapting the conventional processes, Transferwise attempted to change the way money is transferred – and they’ve seen remarkable success. Although just 5 years old, Transferwise has handled over £3 billion, and supports over 300 currency routes around the world.

Background

Taken From StackExchange
Taken From StackExchange

The founders of Transferwise have used the company’s history as their guiding narrative. Taavet Hinrikus and Kristo Käärmann were initially just friends from Estonia, who had found a clever and convenient arrangement. Taavet was Skype’s first employee – in Estonia. But he lived in London, and being paid in Euros was causing him to lose money. Converting to Pounds came with high costs and poor exchange rates. Kristo lived in London and was earning Pounds, but he had a mortgage back in Estonia.

“Each month the pair checked that day’s mid-market rate on Reuters to find a fair exchange rate. Kristo put pounds into Taavet’s UK bank account, and Taavet topped up his friend’s euro account with euros. Both got the currency they needed, and neither paid a cent in hidden bank charges.”

The pair realised that they could use this system to save others money, just as it had saved them. In January 2011, Transferwise was born.

The original idea

Transferwise was created according to the same principles. Rob Price of Business Insider explains:

“The company… [matches] up payments with those going the opposite direction… So “your” money never actually leaves the country — it’s rerouted to someone who’s being sent a similar amount by someone overseas. Your foreign recipient, meanwhile, receives their funds from someone trying to send money out of their own country.”

Transferwise would do all this work behind the scenes, and so for the customer it worked no differently to any other money transfer company.

How it works

Transferwise no longer uses the marketplace idea, and have fixed fees. Nonetheless, they are still disrupting the sector by charging next to nothing and making remittances cheaper than ever before.

Fees

Transferwise charges fees far lower than those charged by banks or other independent companies. Transferwise charges just £1 for transfers lower than £200. Anything above this threshold is free. Fees differ slightly according to the currencies being traded.

Transferwise app

Another factor which sets Transferwise apart, especially with the younger generations, is their extremely functional app. Funds can be transferred, transfers can be tracked or cancelled, and all necessary details are on hand.

Stripping off” campaign

In June 2014 in London, and February 2015 in New York, Transferwise ran a “stripping off campaign”, to bring attention to the banks’ hidden fees, and publicity to the company. 200 staff and fans stripped to their underwear in cold conditions, which was covered by Good Morning America.

Management

Transferwise is run by its two founders:

Kristo Käärmann is Executive Founder of Transferwise, in charge of operations activities, technology, development, compliance and regulatory issues. He previously worked developing systems and processes at PwC and Deloitte.

Taavet Hinrikus is Chief Executive Officer of Transferwise. He helped develop the idea for Skype, and became Skype’s first employee. He helps various companies as an angel investor and advisor.

Financial reports

Size and reach

Transferwise was given a $1 billion valuation in January 2015. It has a host of big investors, including Richard Branson, who invested $25 million in 2014. Transferwise focus on individual clients, rather than businesses, but there are many SMEs who use them.

Despite their massive valuation, Transferwise may still be considered a small company, due to their low revenue. Transferwise released a set of abbreviated accounts at the end of 2015, which is only permissible for small companies. This is due to their extremely low fees, which as yet has kept them unprofitable despite their size.

Transferwise has transferred more than £3 billion since launch, and is currently executing £500 million worth of transfers every month.

Transferwise is backed by some big investors, including IA Ventures and Index Ventures, as well as individual investors such as PayPal co-founder Max Levchin, former Betfair CEO David Yu, and Wonga.com co-founder Errol Damelin. In 2014, Virgin’s Richard Branson added his name to the list.

Revenue

As mentioned, Transferwise brings in very limited revenue, despite its size. For the year ending March 2015, revenue equalled less than £6.5 million. That is in contrast to £11.6 million ($17 million) of debts due within a year.

Public Stock Performance

Transferwise is not yet a publicly listed company.

Licensing info

Transferwise are authorised by the Financial Conduct Authority and registered with HMRC in the United Kingdom.

Reputation and criticism

Transferwise has become very popular, due to insignificant fees, ease of use, and their image of revolutionising the industry. On reviews site Trustpilot they have a rating of 9.5/10 from over 26 000 reviews.

News that Transferwise is in talks to partner with big banks may compromise their image. The Transferwise selling point has relied primarily on “bank-bashing”, but the move seems to be necessary to increase revenue.

Oscar Williams-Grut of Business Insider also found fault with the Transferwise release of abbreviated accounts:

“Questions might also be asked about how a company that handles so much client money and has built its brand on transparency can justify keeping its own finances so private.”

Nonetheless, Transferwise still seems to be on the way up – as long as they find a way to make a profit while operating according to their ethos.

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