#30 How does TransferWise (now Wise) make money?

Fast and cheap cross-border money transfer without hidden fees

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About TransferWise

TransferWise is an online money transfer service that allows customers to send money at low fares across 50 different currencies. Contrary to traditional exchange services and banks, TransferWise claims to be up to 8x cheaper.

🐣Founded 2011

💵 $5B Valuation

💸 $1.1B Funding Raised

👩‍💻Over 10 million+ Users moving more than £4.5 billion every month, which saves them £3 million in bank fees every day

Transparent pricing with ~1/10th transfer forex fee of a typical bank

How does TransferWise work?

TransferWise uses a proprietary technology infrastructure to make international money transfers more efficient, faster and cheaper than traditional players in the industry. How?

• The idea is to transform any international money transfer into a national one (usually free or costing much less than international ones), thus reducing costs for its users.

• TransferWise holds bank accounts into every single country where it operates

• When money needs to be converted into a different currency, TransferWise takes a part of the balance on the foreign bank account and transmits them to the corresponding local bank account of the recipient.

  eg. If Peter transfers money from US to UK, rather than doing a USD to GBP conversion, transferwise accepts Peter’s USD into Transferwise’s bank account in US and in parallel transfers equivalent GBP from Transferwise’s account in UK to the relevant party in UK.

This approach allows to match opposite flows on money in different currencies, without having to convert them on the market (thus not paying fees to financial intermediaries).

TransferWise is essentially P2P (client-client) online money exchange.

How does TransferWise make money?

Fees

TransferWise offers complete transparency in its process. This online money transfer tool charges

1. A very small percentage of total sending amount which is TransferWise Fees. This is typicaly 0.4%-0.7% of the transfer amount.

2. And a flat fee of certain transfer routes depending upon the country.

Borderless Accounts

The Borderless Account is a bank account provided by TransferWise. Users can opt in to receive a free debit card from MasterCard.

While the account and card is free of charge, customers are monetized through currency conversion fees. These occur when users switch currencies during payments with the debit card or within the account.

TransferWise Borderless Account comparison with traditional bank account

TransferWise For Banks

TransferWise for Banks allows other banks to plug into the company’s system (via the API provided) to offer their customers cheap exchange rates and money transfers.

Connecting to TransferWise’s API is free of charge. Similar to the other income streams, a fee is being charged whenever an international transfer is made.

In this case, the transaction doesn’t occur on the TransferWise platform, but is being made via the partner’s application. Some of the companies that utilize the API integration include German challenger bank N26 as well as Monzo, bunq or Novo.

TransferWise has not disclosed whether or not the API will remain free of charge in the future.

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