TransferWise: Disrupting the Financial Industry Worldwide

Meet the British Fintech Company Launching in Japan

Taavet Hinrikus, co-founder and CEO of TransferWise, the international money transfer platform, stopped by the BCCJ to address members and guests during his visit to Japan in September 2016. Hinrikus is also a World Economic Forum tech pioneer and advisor to the Estonian president on digital matters.

Background to the Company

The TransferWise story begins in London and Estonia, with Hinrikus working for Skype, on the payroll in Estonia and being paid in euros, but living in London, and fellow co-founder Kristo Käärmann working in London but paying off a mortgage back home in Estonia.

Both became increasingly frustrated in dealing with the banking procedures and excessive transfer charges, which were often hidden and added on.

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The pair came up with a simple method to bypass the transfer fees. Every month they checked the day’s mid-market currency rates to find a fair exchange rate. Then Hinrikus would transfer euros directly into Käärmann’s bank account in Estonia, and Käärmann would in turn put pounds into Hinrikus’ account in the UK.

Each got a better deal this way than through traditional bank transfers.

When they discovered how much easier this system was, and how much money they saved in bank transfer fees, they decided to make this service available to everyone and founded TransferWise in 2010.

A-list investors such as Sir Richard Branson, Peter Thiel’s Valar Ventures, and former CitiGroup CEO Vikram Pandit have backed the company.

Starting Up

According to Hinrikus, the desire to create his own company stemmed not from wanting to be a millionaire, but from wanting to serve others.

Two important questions to consider when starting up are “What can you do to make your customer’s life easier?” and “What problem in the world can you solve?” Answering these allows you to build and develop your business, regardless of where in the world you are.

Offering a great service is the most important aspect of entrepreneurship. When customers are satisfied, a company can grow simply by word of mouth, on its own merit, as TransferWise has done.

Having the best talent on your team, and getting localisation right for your target market is also essential to maintain business growth. As Hinrikus explained, “You are only as good as the team you are building.”

The final step is to gather up the courage and just get started, even if it means starting out as a side hustle before taking your venture full time.

How TransferWise Works

TransferWise uses peer-to-peer technology, and this type of platform ensures that money never crosses borders, meaning no banking charges or excessive fees are incurred.

Japan Market Entry

TransferWise Japan was established in June 2014, and after two years of preparation and development, launched its money transfer platform in September 2016.

With 1.31 million Japanese people living abroad, 2.23 million people from overseas who live in Japan, as Japan continues to grow as one of the most popular tourist destinations in Asia, and with major global sporting events coming up in the next few years, Japan is a perfect market for the company’s services.

TransferWise has big plans for its Japan operation, planning continued investment and growing its team from 3 to 10 employees by 2017.

Hinrikus has not felt that entering the Japanese market has been particularly challenging, but TransferWise has been careful to plan for its long-term success by working with the regulators in the industry.

TransferWise in Japan and Beyond

To use the service, customers register and select their desired currencies, inputting their contact and payment details, and indicating the amount they wish to be transferred. A simple three-step verification is in place, which includes an ID check, a My Number check, and address verification.

The sign-up process is a bit more complex than in other countries, but TransferWise is keen to work within Japanese regulations to simplify finding banking partners and do business in Japan.

Users in Japan will be able to avoid banks’ transaction charges and hidden fees of up to 10% of the money being sent, transferring money for three times cheaper (charging about 1%) and within 1-2 business days, compared with the 2-5 days it currently takes.

2016 has been a busy year for the company, launching in Canada, Brazil, China and South Korea so far, and with plans to launch in New Zealand, Singapore and Hong Kong later in the year.

Further down the line TransferWise, which currently possesses an 8% market share in the UK, is aiming for a 5% market share in Japan over the next 2 or 3 years.

Fintech and the Future of Banks

The financial sector has traditionally been slow to adopt new technology – as they are technologically behind, they are unable to act as quickly as the new fintech startups, which are more flexible and able to pivot in line with customer needs.

But an important question for the future is whether fintech startups can survive, or whether they will be consumed and subsumed by banks.

Hinrikus believes that what matters in the end is that there are better financial services that consumers have access to, and he predicts that tech companies will be owning a big portion of this in the years to come.

The last major innovation in the financial sector was the ATM about 50 years ago.

As a big technological revolution (often referred to as the Fourth Industrial Revolution) approaches, it will be interesting to keep an eye on fintech startups and other tech unicorns to see how they shape the financial landscape during the years ahead.


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Article by Vanessa Holden, October 2016.