TransferWise

History

TransferWise was inspired by the personal experiences of Taavet Hinrikus, Skype's first employee, and financial consultant Kristo Käärmann. As Estonians working between their native country and the UK, they had personal experience of the "pain of international money transfer" due to bank charges on the amounts they needed to convert from euros to pounds and vice versa. In the words of Hinrikus, "I was losing five per cent of the money each time I moved it. At the same time my co-founder Kristo Käärmann (also from Estonia) was starting to get paid in the UK and was losing a lot of money transferring cash back home to pay for a mortgage there".

It inspired them to make a private arrangement, with Hinrikus – who was paid in euros – putting this currency directly into Käärmann's Estonian account so he could pay his mortgage without having to convert pounds to euros, while Käärmann returned the favour by putting pounds into Hinrkus' UK account. This arrangement led them to start developing a crowdsourced currency exchange service to offer a cheaper alternative to established institutions.

In February 2012, their approval with the UK financial regulator was finalised. In April 2013, they stopped letting users purchase Bitcoins, blaming pressure from other market players. In its first year, transactions through TransferWise amounted to 10 million EUR. In September 2016,the company announced its customers were sending over £800m per month using the service, saving over £1m a day compared to if they had done the same transaction with their bank.

In May 2016, TransferWise's claim "you save up to 90% against banks" has been considered as misleading by the Advertising Standards Authority (United Kingdom). According to independent comparison site Monito.com, Transferwise was actually on average 83% cheaper than the big four UK banks on major currency "routes", but could be up to 90% cheaper in some occasions.

How it works

From the customer's point of view, money transfers with TransferWise are not so different from conventional money transfers: the customer chooses a recipient and a currency, the money to be transferred is taken from his or her account, the transferring company charges for the service, and some time later, the recipient receives the payment in the chosen currency.

The difference lies in how TransferWise routes the payment. Instead of transferring the sender's money directly to the recipient, it is redirected to the recipient of an equivalent transfer going in the opposite direction. Likewise, the recipient of the transfer receives a payment not from the sender initiating the transfer, but from the sender of the equivalent transfer. This process avoids costly currency conversion and transfers crossing borders.

In 2012, the company's charges were €1—in 2015 raised to €2, £2, $3 etc. (depending on the currency sent)—or 0.5%, whichever is larger, in or of an equivalent amount in the customer's currency. Conventional money transfer using British banks usually charge considerably higher fees, or require minimum transfer sums and give less competitive rates.

TransferWise's system has been compared to the hawala money transfer system.

Investors

TransferWise received seed funding amounting to $1.3 million from a consortium including leading venture firms IA Ventures and Index Ventures, IJNR Ventures , NYPPE as well as individual investors such as PayPal co-founder Max Levchin, former Betfair CEO David Yu, and Wonga.com co-founder Errol Damelin. TransferWise also received investment after being named one of Seedcamp 2011's winners. In May 2013 it was announced that TransferWise had secured a $6 million investment round led by Peter Thiel's Valar Ventures. TransferWise raised a further $25 million in June 2014, adding Richard Branson as an investor. In January 2015, it was announced that TransferWise had raised a $58 million Series C round, led by investors Andreessen Horowitz. In May 2016, TransferWise secured a funding of $26 million, that raised company's valuation to $1.1 billion. As of May 2016, TransferWise has raised a total of $117 million in funding.

Media attention

Named as one of "East London's 20 hottest tech startups" by The Guardian, TransferWise has also been picked as a Wired UK Start Up of the Week as well as being listed as number 12 in Startups.co.uk's list of the top 100 UK start-ups of 2012. TransferWise was also named by TechCrunch as one of five "start-ups to watch" at Seedcamp's 2012 US Demo Day.

In May 2015, Transferwise was ranked No. 8 on CNBC's 2015 Disruptor 50 list.

In August 2015 the company was named a World Economic Forum Tech Pioneer.

In Sep 2016, one of the Founders appeared on BBC Radio 4 Today programme.