Interview: London-based $3.5bln TransferWise CEO optimistic on new UAE presence

TransferWise is a rare profitable fintech firm with no current plans for an IPO, its CEO told Zawya

Kristo Kaarmann, CEO and co-founder of TransferWise

Kristo Kaarmann, CEO and co-founder of TransferWise

TransferWise / Handout via Zawya

Global cross-border payments company TransferWise has obtained a license from the regulatory authority of Abu Dhabi to launch its low-cost fast money transfer platform in the UAE.

“Abu Dhabi and the UAE are going to be the next country where people can start taking advantage of TransferWise product offering. The country is a source base of remittances in the region to around the world and the demand is enormous,” Kristo Käärmann, CEO and co-founder of TransferWise said in an interview with Zawya.

The firm’s product is expected to be launched in early 2020 in the UAE under the Abu Dhabi General Market (ADGM) Financial Services Regulatory Authority (FSRA).

“We have 1,800 people around the world in our 13 offices working on how to make TransferWise more effective, faster, cheaper and more convenient to people in all parts of the world,” he said.

TransferWise was co-founded in 2011 by Kristo Käärmann and Taavet Hinrikus. The firm has a range of high- profile investors including Sir Richard Branson and a mix of private equities and Venture Capital funds such as Black Rock, Lead Edge, Lone Pine, Vitruvian, IVP, Merian Global Investors, Andreessen Horowitz, Valar Ventures and Max Levchin of PayPal.

TransferWise was valued at $3.5 billion after a secondary funding of $292 million in May this year, bringing the total amount raised in both primary and secondary funding to $689 million. Read more here.

TransferWise serves 6 million customers worldwide, processes £4 billion in customer payments every month, and saves people £1 billion a year compared to the same transactions through banks.

Besides the lower costs, the company offers faster transactions: Over 20 percent of its international transfers are instant, delivered in less than 20 seconds.

According to the fintech firm’s CEO, TransferWise’s superior transfer services will be offered to customers in the UAE through its new presence, enabling substantial savings on their transfers.

Saudi Arabia is the “obvious” other major country within the Middle East for TransferWise to consider expanding into; the firm has said that “it is the next on the list” but also that it will focus on UAE right now.

Bank Partnerships

This month, the firm announced integrating with the first Australian bank to allow its customers to use the TransferWise service within the banking app, which Kaarman said is considered a ‘breakthrough’ for the company that undercuts banks around the world on foreign exchange fees.

France’s second largest bank, BPCE, UK’s Monzo and Netherland’s Bung also signed up to offer the TransferWise services to their customers.

TransferWise is looking to strike similar partnerships with banks in the UAE.

“This is a very fast-growing area the banks see that their customers are frustrated by various international banking service. First of all, it’s expensive as it includes high interest rates in their fees; it takes a long time for transfers to arrive; and they don’t have much control over the process."

"Banks themselves are generally not proud of their international abilities and they’re increasingly interested in seeing if they can offer bank services with help of TransferWise,” he continued. “You can still use your bank app as you normally do, but you can get the product offering of instant international transfers by TransferWise from within the app, and which offers less pricing. So, you get the best of both worlds.”

A “Rare” Profitable Fintech

 TransferWise had its major breakthrough, when it became profitable three years ago, according to the CEO.

“I do hear about tech companies that are growing fast, able to raise money with high valuations, but it is very rare that the same companies are also profitable. So, we’re one of those rare ones,” Käärmann said.

TransferWise has consistently reported profits since 2017. This September, the company recorded a net profit after tax of £10.3 million for fiscal year ending March 2019 and a 53 percent revenue boost to £179 million.

“We undercut the banks by about ten times at international banking, and by being profitable, we prove that is sustainable and not just a temporary stage. Actually, over the years, we were able to move at lower costs to undercut the banks even deeper,” he added.

The story of how TransferWise started goes back to when Kaarman moved from Estonia to London and was frustrated by the ‘hidden’ fees charged by banks when he transferred money back home.

“At the time, I had a turnaround that I had a friend that had the exact opposite problem; he was moving Euros to the UK. So, we started swapping money with each other, and we both saved a lot of money compared to what banks would have saved for us,” he said.

On whether the firm will take to an initial public offering (IPO), Kaarmann said: “We don’t necessarily have the need for that (the IPO), as we’re able to provide the liquidity to our investors,”

“Of course, we leave our cards open, but this is not something that is urgently on our minds,” he added.

(Writing by Nada Al Rifai, editing by Seban Scaria)

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© ZAWYA 2019

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