TransferWise launched for U.S. banks Thursday, hoping to make faster, cheaper international payments more easily accessible to Americans and extending its reach to them as a banking platform, as well as a standalone consumer app.
The 8-year-old payments startup, one of the highest valued European fintech companies at $3.5 billion as of this May, initially set out to rival major remittance brands like Western Union and Moneygram, which, like traditional banks, have built a reputation for reliability, but also for charging exorbitant fees in order to send – and in some cases even receive – money internationally. Transferwise claims it can provide the same service without the markups, so users get the real exchange rate and pay a small and transparent fee upfront.
"About 95 percent of people in the world still use their banks to move money around the world and there's no reason for that," said Harsh Sinha, CTO of TransferWise. "Most people are not aware how much the banks charge because they're not transparent about it. But the reality is," once banks plug in the TransferWise API, "that is the most convenient way for those customers to access TransferWise and access the fastest, cheapest payment rail in the world."
The company, which began as a consumer-facing remittance app and has now launched a "Borderless" multi-currency bank account and debit Mastercard, a merchant service, and a bank service, sees new merchant customers as its biggest opportunity for growth in the short term. While the consumer business has continued growing, TransferWise onboards 10,000 new businesses onto its platform each month, Sinha said.
With the launch of the bank product, customers of U.S. partner banks will be able to send money abroad and still reap the benefits of TransferWise's service from within their existing bank accounts.
“Instead of putting heaps of money into building on an outdated model, banks instead can plug into our lightning fast API and deliver TransferWise’s low cost, transparent pricing for their customers, without needing to leave their online banking or app,” said CEO Kristo Käärmann. “This helps our mission of bringing a fast, cheap, convenient service to anyone who needs it and there’s growing demand from companies wanting to use our service.”
The company says it processes £4 billion ($4.9 billion) a month in domestic and cross-border payments for its six million customers; and saves them £1 billion ($1.2 billion) a year, compared to what the same transactions would cost them at a bank.
For example, a transfer of $1,000 from a major U.S. bank or PayPal to a British bank account can cost between $35 and $70 for the sender, according to research commissioned by TransferWise, compared to $7.25 through TransferWise. The same transfer could also cost the recipient $15 or $16 – a significantly lower fee, though the company argues there shouldn't be a receiving fee at all.
The London-based company also says its can transact significantly faster, with more than 20 percent of its international transfers delivered in less than 20 seconds, rather than a number of days. TransferWise can transact 49 different currencies across 1,600 currency routes.
At launch TransferWise has signed on two partners: Novo, a mobile business bank that serves small businesses, freelancers, and startup founders; and Stanford Federal Credit Union, which serves the Stanford University community and other tech companies. It has five European bank partners: Monzo in the U.K., Bunq in the Netherlands, N26 in Germany, LHV in Estonia, and BPCE, France's second largest bank.
Virgin Group founder Richard Branson, venture capital firm Andreessen Horowitz, Valar Ventures co-founder Peter Thiel, and PayPal cofounder Max Levchin are all among the high-profile investors in TransferWise, which last week reported its third year in a row of profitability — a rarity for a young fintech startup. The company reported an increase in its net profit after tax off 66 percent from the previous year to £10.3 million, for fiscal year ending March 2019. Revenues grew 53 percent to £179 million.