TransferWise Funding History: Transferwise received its first round of funding in April 2012 valued at $1.3 million. This was followed in May 2013 with $6 million, $15.4 million in June 2014, and $58.5 million in January 2015. By May 2016, TransferWise secured an additional $26 million in funding, followed close in tow by $65 million in September 2017. The company co-founder and CEO is Kristo Käärmann and the co-founder and chairman is Taavet Hinrikus.
Transferwise has a number of high-level investors associated with it, including Max Levchin, Sir Richard Branson, Vitruvian Partners, Merian Global Investors, Lone Pine Capital, LHV Ventures, Lead Edge Capital, Blackrock, J.P. Morgan, Baillie Gifford, and Andreessen Horowitz. This money transfer company facilitates international online transfers at substantially lower prices than high street banks.
As the pre-eminent low-cost money transfer service, Transferwise has become the premier Fintech enterprise in the industry. This peer-to-peer money transfer company raised $292 million (£234 million) in secondary funding in May 2019. That puts the company at a market valuation of $3.5 billion (£2.679 billion).
Financial Performance of Transferwise
Source: S.O.S. Transferwise
Heading into Q4 2019, Transferwise reported revenues of £179 million, up 53% from its previous earnings report. According to the company, it generated-tax profits of £10.3 million for the year-to-date through March 2019. Based on the financial performance of TransferWise, it has now enjoyed 3 successive years of profitable returns.
Among the many reasons for the continued positive performance of TransferWise are its low-cost, borderless banking accounts which are now available in 170+ countries. Based on the statistics, an estimated 10,000 new business customers sign up with TransferWise monthly, helping the company to process £4 billion + in monthly payments. TransferWise claims to save its customers £1 billion in fees over high street banks, and the company has an equivalent amount on deposit for its customers.
While the company’s performance is certainly laudable, the CEO and co-founders’, Taavet Hinrikus and Kristo Käärmann, focus is on managing their responsibilities to customers over profitability. Such is the financial performance of TransferWise, that it outstrips the profitability of competing FinTech enterprises like Revolut, N26, and Monese. For TransferWise, profitability is a byproduct of the small percentage the company takes from every transaction that it carries out.
That TransferWise is considered a Unicorn in the money transfer arena comes as no surprise to its adherents. The company has successfully taken on big banks and established financial enterprises by providing customers with cost-effective solutions to their money transfer dilemmas. It bucks convention by exposing all the hidden fees that are charged by banks and traditional forex companies to clients. While many competitors market zero-fee services, it is their forex markup that eliminates any potential for cost savings that customers may enjoy.
The company operates on the cutting edge, with innovative solutions to money transfers. It has a powerful, adaptive, and dynamic app for Android and iOS, which ranks among the best apps in the money transfer market. Additionally, TransferWise is regarded as one of the leading companies vis-a-vis its organisational processes. It seeks out the ultimate user experience, by providing clients with greater autonomy. When ranked among other providers in terms of margins, the total cost borne by customers is significantly lower with TransferWise.
For example, a comparison between multiple providers with a $500 transfer from the United States to Mexico (2018 figures) indicates that TransferWise’s margin was 1.1%, for a total cost of $506 for the transfer. All other providers including: Ria, ViaNex, Walmart, Transfast, Xoom, Western Union, Remitly, Moneygram, and World Remit had a higher margin. By adopting a customer-centric policy as a priority, and incorporating it with instant transfers, the company has successfully differentiated itself from its competitors. However, on small transfer amounts (less than £300) TransferWise is not competitive with other big-name money transfer providers such as Western Union, Transfast, Remitly and ViaNex.
How Can Other UK Businesses Learn from the TransferWise Model?
Clearly, TransferWise has prioritised its customers over profitability. By focusing on what customers want, and providing it for them, TransferWise naturally assures itself of large volumes of clients. TransferWise charges a small fee based on each transaction that is carried out, and by acceding to the needs of its clientele, it can stay abreast of the competition, in a customer-centric business. Two years ago, TransferWise claimed 15% of the entire UK money transfer market.
By May 2019, the company was valued at $3.5 billion, or £2.679 billion. By focusing on non-remittances through white-collar transfers, TransferWise has managed to increase the average amount sent 2-3 times more than its competitors ($2300 per transfer/£1761 per transfer). While significantly smaller than the transfer amount of big banks, it places TransferWise in a class of its own in the FinTech sector. When the focus is on customers and on improving the services available to them, businesses tend to flourish.