A start-up that is trying to usurp Western Union and shake up the $689 billion money transfer market
Joel Dreyfuss reports: Like a lot of start-ups, TransferWise started with a simple idea, inspired by the frustrating personal experience of one of its founders.
Kristo Käärmann landed a job with Skype in London a decade ago but still had a savings account in his native Estonia. When he wired money home through his bank, he was surprised at the transfer cost. It was not just the bank fee that penalized him but the exchange rate the bank used to convert his pounds into euros. Käärmann’s fellow Estonian in London Taavet Hinrikus was paid in euros and needed to convert his pay into pounds, so they worked out a deal using mid-market foreign exchange rates. They soon had a network of friends exchanging money informally.
- London-based TransferWise handles $5 billion a month in money remittances across 71 countries.
- The flow of money between individuals across national boundaries totaled $689 billion last year and has benefited companies like Western Union and Moneygram.
- TransferWise targets the cost of remittances, on average 7%, but as high as 10% to certain African countries.
- In the last quarter, the money arrived in 19% of recipients’ bank accounts in less than 20 seconds.
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