After 3 straight profitable years, Transferwise eyes Asia expansion

International money transfer startup TransferWise reported a revenue jump of 53% to £179 million (US$223 million) for the financial year ended March 2019, amid the growing wave of digital-led banks threatening to disrupt conventional banking methods. Net profit after tax increased by around 66% to £10.3 million (US$12.9 million), marking the third consecutive year of profits for the startup.

Valued at US$3.5 billion, TransferWise stands out among a breed of tech unicorns that struggle to achieve profitability. Its CEO and co-founder Kristo Käärmann has attributed the company’s ability to turn a profit in such a short time to its low advertising spend – customers are acquired mostly via word of mouth.

(L-R) Transferwise founders Taavet Hinrikus and Kristo Käärmann / Photo credit: Transferwise

Tracking over 15 million transactions globally to date, TransferWise’s borderless debit card is expected to launch in Singapore in the next two months and in Japan next year. The company is also looking to expand its two-way money transfer service across Asia.

TransferWise joins a league of fintech firms that are competing with traditional banks and remittance giants like MoneyGram and Western Union on the basis of more competitive mid-market exchange rates – i.e. the rates reflected on Google – as well as faster sending speeds and a transparent fee structure. It does this by eliminating intermediaries and bypassing legacy network systems like SWIFT. 

The London-headquartered startup serves 6 million people and processes £4 billion (US$5 billion) in transactions worldwide every month, it said in a release. 

Beyond its money transfer platform, TransferWise’s also offers multicountry, multicurrency accounts that include a debit card and its API (application programming interface) that larger enterprises and banks can tap to process fund transfers by their own customers.

These products are synergistic – they all help people move money across the globe, Käärmann tells Tech in Asia in an interview. As such, revenue growth is proportional to the volume of transactions that are made. Among TransferWise’s user segments, individual consumers form a larger group than businesses, although the latter is “growing very fast,” with 10,000 new companies coming on board every month. 

The company currently has over £1 billion (US$1.25 million) in borderless accounts held by users across Europe, Australia, New Zealand, and the US, since it launched the service in 2017. But increasingly, a strategic focus is to expand its services in Asia Pacific to match what it offers to customers in Europe, Kaarmaan says. 

Partnering with banks

Though it offers money transfers and other services, TransferWise is not a digital bank. Instead, it sees these entities as potential partners through which it can increase its distribution network. “Banks – the smarter ones – are starting to use our services and offer TransferWise to their customers on their own platform,” Käärmann says.

“Banks do a decent job at the other parts of banking – whether it’s borrowing for a mortgage, offering merchant services, or trade finance… But as soon as that becomes international, [they] do a terrible job, and that’s where we come in,” he adds.

Photo credit: TransferWise

The company has teamed up with BPCE, France’s second largest bank, as well as digital services like Monzo and Bunq in the past year. While Monzo, which focuses primarily on domestic banking services within the UK, is good at enhancing the local banking experience, according to Käärmann, it lacks the capability to handle international money movements. 

Rise of challenger banks

Bringing Asia on board