You don’t have to follow the financial technology industry or work with developers in faraway lands to know TransferWise, arguably the world’s leading peer-to-peer money-transferring startup. Thanks to its presence in more than 70 countries, low-cost rates for moving money internationally and, of course, its famous “nothing to hide” PR campaign that featured its semi-naked employees running through the streets of London and New York, TransferWise has become one of the world’s most recognizable fintech brands. Along the way, the company helped usher in the age of the rebel-fintech adolescent startup that could compete and win against dusty incumbents on the basis of transparency, value, technology and, perhaps most importantly, moxy.
But today, the macroeconomic, business and political conditions that served as the feedstock to co-founders Kristo Käärman and Taavet Hinrikus when they launched TransferWise are ancient history. Can it keep scaling amidst heightened trade tensions, the unfortunate rise of xenophobia and capital controls? Will it continue to grow profits in the face of competition from other well-funded fintech startups and incumbents that look less dusty? Does the company, which has recently launched important partnerships, a revamped “borderless” business offering and a Mastercard debit card, have aspirations to provide other financial services? And, why isn’t TransferWise public? In the interview below, CEO Käärman addresses these questions head-on. In doing so, the Estonian native makes the case for his company’s future as a trusted partner for its dedicated (and growing) customer base.
Gregg Schoenberg: It’s good to connect, Kristo. I recently took a look at your financials, which show that despite your fairly large size, you’re still growing at a very fast pace.
Kristo Käärman: Yes, things are going very well. Tracking back to the very early days when we started, our hypothesis was that we can service customers about 10 times cheaper than banks. That was really proven out about two years ago when we reached break-even, which is an important proof point: tech that’s paying for itself. It’s not paid for with investors.
GS: So it actually works.
KK: Yes, this thing actually works. In fact, in our original hypothesis, we thought that we could probably do our biggest trade routes for 0.5 percent in fees. We’ve now revised this and are now operating at 0.3 percent in our largest routes.
GS: I assume that’s all in? Because TransferWise always uses the mid-market or spot rate.
KK: Yes, and from the beginning, we’ve taken the approach that we never hide anything in the spread.
GS: Before we leave the topic of your financials, is there any color that you would care to give on how things are going subsequent to when you reported your numbers?
KK: Things are going in the same direction, which is consistent with the mission of the company: Grow the volume and the customer base, which gives us more scale to enable us to charge skinnier and skinnier margins.
GS: Taavet has said that he knows the moment when TransferWise’s transaction volumes will surpass Western Union’s. When is that?
KK: We’re a little bit behind Western Union, but give us a few years.
What’s more powerful? Anti-trade factions or the natural forces leading us to become more global?
GS: So it won’t be in 2019?
KK: It might be, but I doubt it. Actually, you can kind of work it out, because Western Union is a public company and their volumes aren’t really growing very much. Today, our volumes are still smaller than Western Union’s. Then again, Western Union’s volumes are not very big compared to Citibank’s or HSBC’s.
GS: Speaking of volume, do you disclose your biggest foreign exchange (FX) crosses? I couldn’t find them on your site.
KK: It’s not disclosed, but we make no secret about this either. Let me also preface this by saying that whenever we’re in the…
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