When TransferWise first launched, CEO Kristo Käärmann did not expect a favorable response from incumbents, which still charge consumers considerably higher fees for cross-border transfers, compared to TransferWise’s 0.5% rate (in the U.K., on average).
But the opposite trend began happening.
“We learned overtime that banks have an incredibly high cost-base to do the same thing as we do,” Käärmann said at the Future of Fintech conference this week. “It turns out, it costs them seven times more to do a foreign exchange transaction than it costs as.”
So instead, small regional banks, as well as neobanks, began integrating Transferwise into their apps as an option for international transfers.
“There was this small bank in Hungary, which would help its customers onboard on TransferWise,” instead of using their internal correspondence service, he said. “We see that with neobanks like N26 and Monzo; they are not integrating with Deutsche Bank for correspondence banking, they are integrating TransferWise.”
N26, for example, allows users to directly link their account to TransferWise for international payments. “It’s like ‘Login with Facebook’ or Google, and it’s exciting to see this in banking,” he added.
Currently, about $1.5 billion goes through the company’s system monthly. “But the number I am really proud of is that our customers save $1.5 million in transfer fees daily,” Käärmann said. “In the U.K., we charge an average of 0.5%, so $5 to a $1,000. Banks usually charge $25 of international wire transfer fee,” in addition to the average 4% rate. “So, for $1,000 it comes up to $75.”
The company is already surpassing traditional banks in market share, at least in the U.K., according to Käärmann: “They [banks] should do the same thing as neobanks do; that’s the right thing.”1 - Reader Likes This Post