TransferWise Brings Transparency To Remittances

“Remittances” and “transparency” are not words that often go hand-in-hand.

With banks often shrouding international transfer fees and setting transfer rates designed to generate profit, sending and receiving remittances can be a costly and convoluted business.

TransferWise is a popular UK-based startup that’s looking to change that, trying to do for the remittance business what Skype has done for international calling: take the existing price point, and blow it out of the water.

TransferWise has received no shortage of attention in the media as of late, and in May received a $6 million funding round (http://www.pymnts.com/briefing-room/commerce-3-0/playmakers/startup-roundup-who-s-getting-funded) led by PayPal co-founder Peter Thiel’s Valar Ventures.

What has those inside the industry so excited about TransferWise, and which business mogul recently showered them with praise? PYMNTS.com spoke with Kristo Kaarmann, the company’s co-founder, to find out.

PYMNTS.com: This is the first time we’ve featured TransferWise in PYMNTS.com. Can you introduce your service to our readers and explain how you’ve come to refer to your business as the “Skype of money transfer?”

Kristo Kaarmann: Of course. TransferWise is a peer-to-peer international money transfer platform. My co-founder Taavet and I came up with the idea because banks charge a lot for international money transfers – even when they claim there are ‘no fees’.

TransferWise is simply a platform that allows regular people to access the real, mid-market exchange rate, cutting out traditional bank fees altogether. We do this using peer-to-peer technology, charging customers only a tiny, fully transparent service charge (£1 for sums under £200, 0.5 percent for every value above that).

We don’t actually call ourselves the “Skype of money transfer” it’s just how our customers and journalists have described us. I can understand why they’ve branded us this way, though. We’re trying to do to international payments what Skype did to international calls. That is, flip the market on its head by dramatically reducing the cost.

One of TransferWise’s main selling points is that when a transaction is processed, the mid-market rate is used in favor of the “standard” bank rate. Can you explain the difference between these two rates, how your company came up with this concept and why it’s the best option for consumers?

There is no such thing as ‘the standard bank rate’. Banks and currency brokers set a exchange rate that is different from the mid-market rate (that’s the real rate – the one quoted in the newspapers and xe.com) in order to make a profit. They widen the spread between the two rates to take an extra 3-5 percent of the sum being sent – often on top of their service charge. Our ‘concept’ is simply transparency. Our whole fee is illustrated upfront before a customer makes a transfer. It benefits the consumer not only because it’s honest and fair, but also because it’s around 85 percent cheaper than using a bank.

So far, which business or consumer demographics have you seen gravitating to your service most frequently?

All sorts – there isn’t one set demographic since we can cater for everyone sending money through the routes we offer. That said, we see a lot of expats – like Taavet and I used to be – transferring our salaries across borders to pay living costs or for a property abroad. We also have large numbers of international students paying their fees and living costs through us. And we are starting to see more and more small business paying their overseas staff and suppliers through us.

Your website is filled with customer stories and positive reviews both from media publications and users. How important do you believe fostering this positive perception is, especially as TransferWise looks to expand both in its current countries and internationally?

It’s vital since we’re trying to be the very opposite of a bank – and part of the way we’re doing this is by asking customers and the media to review our service publically. In particular, we encourage all our customers to leave their comments on the independent reviews platform, TrustPilot. The process forces us to listen closely to our customers and live up to our claims. There’s no better way to keep the company on its toes! It appears to be working – we rank in the top five most trusted financial services on TrustPilot. The first bank comes in at number 143!

TransferWise just received a tweet from famed business mogul Richard Branson. How do you feel about being lauded by such an esteemed entrepreneur?

Honoured and excited. He said we were “shaking up the financial services sector.” Quite the accolade since he undoubtedly knows a good idea when he sees one.