Disruption, intentional or accidental, is the very essence that simultaneously causes great discomfort while at the same time extraordinary opportunity.
TransferWise is an innovative on-line financial transaction platform that is taking hold. It uses peer-to-peer technology and offers competitive and transparent rates. Using the daily mid-market exchange rate and low transaction percentage rates, both clearly identified before the transaction, customers know exactly how much will be transferred. TransferWise challenges most, if not all, money transfer businesses and banks.
The growth opportunity for TransferWise is extraordinary.
As an example, exclusively within the financial sector of international migrants and remittances, the World Bank estimates that more than 250 million people move annually in order to secure better economic opportunity; and, more than $601 billion is transferred annually via money transfer institutions as remittances. As populations shift, migrants consistently send money home to help with their family. Depending on the institution and method used to transfer funds, the financial sector potentially gains approximately 10% per transaction.
On a small individual scale, for instance, to transfer $100 cash through Western Union, the customer pays fees from $5 to $15 according to selected transfer method. Averaging $10 per transaction. Then it is not very clear what the exchange rate would be for the remaining $85 – $95 to know the exact amount received by the recipient.
When this is translated to a global scale, the fees alone represent a potential $60 billion revenue stream for money transfer businesses.
What happens when the disruptor redesigns a system of money flow? In this case, TransferWise is making a calculated move that makes sense.
TransferWise was founded in 2011 by Taavet Hinrikus, previously the Director of Strategy for Skype, and Kristo Käärmann, who was a management consultant with Deloitte Consulting and PricewaterhouseCoopers.
Hinrikus and Käärmann created TransferWise “out of frustration with the high fees charged by banks on international money transfer.”
When asked about the how TransferWise started?
A simple story is shared. “Taavet was based in London but paid in euros; Kristo worked in London (paid in British pounds) but paid a mortgage in Estonia in euros. They each needed what the other had so they figured out a fair way to exchange money between themselves, using the mid-market exchange rate: the real rate – without the mark-up rate and fees charged by the bank. They saved thousands of pounds and realized there were millions of people across the world who could do the same. So the founding principle of our company is fairness – otherwise you’d be screwing over your friend and no-one wants to do that.”
According to TransferWise research, over $750 million is transferred across the globe every month and by using their platform TransferWise potentially saves customers $34 million every month.
How does it work? Peer to peer.
“TransferWise is working to make the world a tiny bit better by helping to make the financial system fair.”
In a shaky global economy at best today, TransferWise offers a reprieve for families sending money home and also a model to replicate across the international financial sector, how to be fair.
By Keri Douglas, founder and publisher, 9MusesNews.com. Copyright protected 2016. All rights reserved.