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UK fintech Wise beta tests index investing for select customers

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·Contributor
·3 min read
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UK fintech Wise offers index investing to customers
When customers choose to hold their money as stocks, Wise will invest it in the iShares World Equity Index Fund, an index tracking fund, managed by BlackRock. Photo: Wise

Fintech company Wise (WISE.L) has launched index investing to its customers, allowing them to convert cash to stock assets.

The firm, which was formerly known as TransferWise, has currently implemented the feature as a beta function on its app.

Customers can switch back and forth from cash to stocks with its new “Assets” feature, however, it is only available to UK residents and businesses at the moment.

When customers choose to hold their money as stocks, Wise will invest it in the iShares World Equity Index Fund, an index tracking fund, managed by BlackRock. It tracks the MSCI World Index.

During the beta trial, there will be a fund fee of 0.15% annually. After beta, customers will also pay a service fee of 0.55% per year.

Known for its cheap money transfers, the payments app has more than 10 million customers, and transfers around £5bn ($6.9bn) on their behalf every month. It claims its rates are as much as 12 times cheaper than mainstream banks.

Wise said: “Banks invest the money you hold with them to make money for themselves. They use it to fund mortgages, business loans and credit cards for other customers — you’re effectively supporting their business for free, and we don’t think that’s fair.

“So we built Assets to let you choose how to hold your money.”

Read more: Fintech Wise could be 'major coup' for London Stock Exchange

Wise made its market debut on the London Stock Exchange (LSEG.L) on 7 July via a direct listing rather than selling shares at a set price in advance.

This meant that the opening price was determined in an open auction on the date of admission to the exchange. In direct listings, companies sell shares directly to the public without getting help from intermediaries.

This happens when firms can not afford underwriting, do not want share dilution, or are avoiding lockup periods, a less-expensive option than an IPO, according to Investopedia.

Wise shares over the last five days.
Wise shares over the last five days. Chart: Yahoo Finance UK

The method was pioneered by Spotify (SPOT), which used a direct listing to join the New York Stock Exchange in 2018. However, it is rarely seen on this side of the Atlantic.

Wise was valued at almost £9bn after listing, making it the largest-ever listing of a UK tech company. Shares began publicly trading at 800p in London and finished the day up 10% at 880p. They have since climbed to 1030p at the time of writing.

Virgin mogul Sir Richard Branson was an early backer of Wise, as was famed Silicon Valley venture capital firm Andreessen Horowitz. More recently, Scottish money manager Baille Gifford has also become a significant shareholder.

Read more: Wise boss Kristo Kaarmann on 'cool' listing that will turn customers into investors

The company was founded by Kristo Käärmann in London in 2010 along with fellow Estonian expat Taavet Hinrikus. The pair were astonished at the cost of sending money back home and set about using technology to make it cheaper.

As well as international money transfers, the company has branched out into new areas like business accounts and cash cards.

Wise disclosed revenues of £421m last year and rapid growth. It became a unicorn, a tech start-up worth at least $1bn (£720m), in 2015.

Watch: What are SPACs?