TransferWise

TransferWise was founded by Taavet Hinrikus, Skype's first employee,[7] 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"[8] 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 percent 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".[9][10]

TransferWise co-founder Taavet Hinrikus in 2017

This 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 reciprocated by putting pounds into Hinrikus' UK account.[11] This arrangement led them to start developing a crowdsourced currency exchange service to offer a cheaper alternative to established institutions.[12]

In February 2012, their approval from the UK financial regulator was finalised.[13] In April 2013, they stopped letting users purchase Bitcoin, citing pressure from banking providers.[14] In its first year, transactions through TransferWise amounted to €10 million.[15] In May 2017, the company announced its customers were sending over £1 billion every month using the service.[16]

In May 2016, TransferWise's claim "you save up to 90% against banks" was considered as misleading by the Advertising Standards Authority.[17] 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 certain specific cases.[18] In April 2017, an internal memo from British bank Santander showed how much the bank was making from its charges on international money transfer and how much it could lose to new entrants, specifically TransferWise.[19]

In April 2017, TransferWise announced its decision to move its European headquarters from London to the European continent due to Brexit.[20] The same month, the company announced its APAC hub in Singapore[21] after becoming one of the first remittance companies to be allowed to offer online verification in Singapore.

In May 2017, TransferWise launched a new service, the Borderless account. Initially, the account was for businesses and freelancers with an account and card for consumers planned for later in the year.[22] The Borderless account was available in Europe and the US at launch.[23] A multi-currencies Mastercard debit card was launched in January 2018 for customers located in the European Union, and support was later added for customers in the United States, with more countries expected to follow in 2019.

Also in May 2017, the company announced it had been operationally profitable since the beginning of the year.[24]

Two years later, in May 2019, the company had the secondary investment round of $292M and reached the total valuation of $3.5B, more than double the valuation TransferWise achieved in late 2017 at the time of its $280 million Series E round.[25]

In 2020, TransferWise reported an increase in profits from the previous year despite the challenges brought by the coronavirus pandemic. In the 12 months since March 31, reports indicate a pre-tax profit of $26M, up from $12.9M in 2019.[26]

Regular money transfer versus peer-to-peer money transfer

TransferWise routes most payments not by transferring the sender's money directly to the recipient as it is in the case of SWIFT, but by matching the amounts with other TransferWise's users sending the other way around. TransferWise then uses these pools of funds to pay out transfers via local bank transfer.[27]

This process avoids currency conversion and transfers crossing borders.[28]

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.[8]

In 2018, TransferWise revamped its fee structure to a percentage of the amount alongside a fixed fee (for example 0.35% + £0.80 when sending from GBP to EUR). In 2019, the fixed part was cancelled and the total fee became a decreasing percentage of the amount—for example £0.26 when sending £1 and £0.30 when sending £10 (both transfers with exchange to euros), the percentage dropping to a little below 0.4% (in the case of these currencies) with large amounts.

TransferWise's system has been compared to the hawala money transfer system.[29][30][31][32]

Screenshot of Balances in several currencies of a Borderless Account

To set up the borderless account,[33] prior personal identity verification is needed. Once a user is approved for this account, they can hold multiple currencies concurrently, and decide when to make a transfer to best suit their financial needs. Personal local bank details can also be issued in a handful of currencies to receive payments from third parties, therefore avoiding the use of SWIFT transfers or having the sender register with TransferWise. This is similar to having a multi-currency brokerage account.

List of sending and receiving currencies supported by TransferWise (December 2020):

Currency	Receiving	Sending	Local account number
United States dollar	Y	Y	Y
Canadian dollar	Y	Y	Y
Argentine peso	Y
Brazilian real	Y	Y
Chilean peso	Y
Costa Rican colón	Y
Mexican peso	Y
Peruvian nuevo sol	Y
Uruguayan peso	Y
Euro	Y	Y	Y
British pound	Y	Y	Y
Swiss franc	Y	Y
Danish krone	Y	Y
Norwegian krone	Y	Y
Swedish krona	Y	Y
Bulgarian lev	Y	Y
Czech koruna	Y	Y
Croatian kuna	Y	Y
Hungarian forint	Y	Y	Y
Polish złoty	Y	Y	Y
Romanian leu	Y	Y
Russian rouble	Y
Ukrainian hryvnia	Y
Georgian lari	Y
Australian dollar	Y	Y	Y
New Zealand dollar	Y	Y	Y
United Arab Emirates dirham	Y	Y
Israeli shekel	Y
Turkish lira	Y	Y	Y
Egyptian pound	Y
Moroccan dirham	Y
Ghanaian cedi	Y
Kenyan shilling	Y
Nigerian naira	Y
Tanzanian shilling	Y
Ugandan shilling	Y
West African CFA franc	Y
South African rand	Y
Bangladeshi taka	Y
Indian rupee	Y	Y
Nepalese rupee	Y
Sri Lankan rupee	Y
Pakistani rupee	Y
Chinese yuan	Y
Hong Kong dollar	Y	Y
Indonesian rupiah	Y
Japanese yen	Y	Y
South Korean won	Y
Malaysian ringgit	Y	Y
Philippine peso	Y
Singapore dollar	Y	Y	Y
Thai baht	Y
Vietnamese dong	Y	Y

TransferWise received seed funding amounting to $1.3 million from a consortium including 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.[34] TransferWise also received investment after being named one of Seedcamp 2011's winners.[35] In May 2013, it was announced that TransferWise had secured a $6 million investment round led by Peter Thiel's Valar Ventures.[36] TransferWise raised a further $25 million in June 2014, adding Richard Branson as an investor.[37] In January 2015, it was announced that TransferWise had raised a $58 million Series C round, led by investors Andreessen Horowitz.[38] In May 2016, TransferWise secured a funding of $26 million. This raised the company's valuation to $1.1 billion. As of May 2016, TransferWise has raised a total of $117 million in funding.[39] In November 2017, the company raised a $280 million Series E led by Old Mutual Global Investors and IVP, as well as Sapphire Ventures, Japanese Mitsui & Co, and World Innovation Lab.[40] The company's revenue reached $151 Million in September 2018.[41]

Named as one of "East London's 20 hottest tech startups" by The Guardian,[42] TransferWise has also been picked as a Wired UK Start Up of the Week[43] as well as being listed as number 12 in Startups.co.uk's list of the top 100 UK start-ups of 2012.[44] TransferWise was also named by TechCrunch as one of five "start-ups to watch" at Seedcamp's 2012 US Demo Day.[45]

In May 2015, TransferWise was ranked No. 8 on CNBC's 2015 Disruptor 50 list.[46]

In August 2015, the company was named a World Economic Forum Tech Pioneer.[47]

• CurrencyFair
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• Midpoint (company)
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