The international-payment platform is heading to Mexico
Yahoo Finance: Investing
The proposition of TransferWise is about as simple as
it gets: “We’re focused on making it very easy, very fast and very cheap
to send money internationally.” That’s how CEO Taavet Hinrikus puts it.
Of course, some people never have a
reason to send money around the world. But enough people do—either to a
relative living in another country, or for business purposes, or for
repayments on a student loan—that TransferWise now handles $750 million
per month for customers, and has sent more than $2 billion in total.
Enough people are using TransferWise in the U.K., its home market, that
it now has 5% market share, meaning that 5% of money sent from the U.K.
to other countries is sent using TransferWise. “So what keeps us up at
night is thinking, How do we grow that from 5% to 15% in the next two
years, and how do we get the next bunch of countries to the 5% mark,”
says Hinrikus.
To that end, TransferWise
launched in Canada last week, and today launches in Mexico, which is
significant beyond just incremental expansion, because U.S. to Mexico is
the largest corridor for payments sent from the U.S. to another
country. $25 billion is sent from the U.S. to Mexico each year, according to the U.S. Government Accountability Office
(GAO). TransferWise will charge $3 for payments from the U.S. to Mexico
under $200, and a 1.5% fee for payments over $200, whereas Western
Union and banks charge an average 5% for international remittances of
$200, according to World Bank Group.
As
it happens, remittances from the U.S. to Mexico have become a major
issue in the presidential campaign of Donald Trump. He has said that he
would force Mexico to pay for his proposed border wall by blocking remittances from Mexican immigrants in the U.S.
One
year ago, TransferWise was a European company only. Last year it
launched in the U.S. and Australia, and this year has launched in
Singapore, Japan, Canada, and now Mexico.
There’s
a long runway to growth for TransferWise, but many other competitors
are eyeing the same path. Xoom, TransFast, Dwolla and Venmo, to name
just a few, are very different platforms but all purport to offer the
same basic convenience: faster transfer times and lower transfer fees
than the incumbent giants. PayPal (PYPL) owns two of those: Venmo and Xoom.
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In the U.S., among tech-savvy
Millennials, the best-known right now is Venmo, which lets you instantly
send money to a friend from your phone, but only in the U.S. Hinrikus
says TransferWise is basically Venmo for international payments. It gets
compared to Venmo, but doesn’t compete with Venmo because TransferWise
doesn’t allow for payments where both parties are in the U.S.—it’s only
for sending money internationally. “Really the competition for us is
banks-- it’s the Citibanks (C) and HSBCs (HSBC)
of the world,” he says. “If you ask our customers how they used to send
money to another country, it was their bank or Western Union (WU).”
Those
incumbents, Hinrikus says, charge high fees for international transfers
(for example, Wells Fargo takes 4.36% on payments up to $200, and 2.64%
for payments over $500, Citibank takes 2.57% on any payment amount) and
the recipient has to wait for a few days. TransferWise is harnessing a
shift in banking behavior: the unbundling from banks, and the mobile
revolution. “It used to be that you would choose your bank when you
first open a bank account, when you’re 18, and you stick with that bank
for the rest of your life,” says Hinrikus. “But we’re seeing now a huge
wave of specialist tech companies who are biting away vertical after
vertical in banking. And also, people are banking from their mobiles
now.”
To
help in its effort, Hinrikus and TransferWise even launched a P.R. war
in Europe against bank transfer fees, complete with stunts like a recent one in London
involving Parkour runners. The campaign, Stop Hidden Fees, has been
picked up by the U.K.’s Conservative Party, which wants to pass a law to
require more transparency from banks about fees. “We started
TransferWise because we were frustrated by the behaviors of banks of
hiding their fees in the exchange rates,” Hinrikus says.
Many
other new fintech companies had the same motivation. And with a bubbly
funding environment (TransferWise has raised nearly $100 million from
big names like Richard Branson and Andreessen Horowitz), new entrants
are still coming, and it is unclear which will emerge as the leader.
Culled from yahoo Finance
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