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.
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.
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology.