The London-headquartered international money transfer service, Transfer Wise, recently valued at $ 3.5 billion, opened the U.K. Have obtained an additional license with regulators to be able to offer investment products in the future.
This would mean that the U.K. Customers with money transfer wise deposits Multi-currency or so-called “borderless” accounts will be given the option to work harder on their behalf. Total deposits currently sit at £ 2 billion, so the potential potential inactivity of the customer is very high.
However, the company is not showing more details on its future investment product, except that it will initially offer “simple, inexpensive funds from reputable providers” to help customers earn returns on their balance. Funds up to £ 85,000 held in a transfer wise account as per customer will be protected under the Financial Services Compensation Scheme. The new offering is still under development and will launch “in the next 12 months”.
Zooming in further, TransferWise says that a growing number of its 8 million customers are using borderless accounts as an international banking solution. Nearly one million Transfer Wise debit cards have been issued since 2018, and now the Transfer Wise account also supports direct debit, instant international payments to friends, and Apple and Google Pay. With the addition of savings and investment, Transfer Wise says its vision is to replace “expensive, old-world international banking” for borderless accounts for expats, freelancers and travelers.
“You and I have been talking since 2011, when you first reported that TransferWise was going live, and I think you will appreciate over time that we have expanded the characteristics that TransferWise is offering to our customers. , “Co-founder and current CEO Christo Käärmann told me on a call. “We launched a borderless account to get people on the streets and keep money. We added debit cards so that they could use the money that they put in places where they could use the card. And in some ways it is no different. “
Sticking to broad brush strokes instead of specific product details (despite my frequent inquiries), Käärmann says that after listening to customers, TransferWise wants to help them maintain their balance in a balanced way.
“Clearly they have already understood that Transfer Wise works for them,” he says. “And not just as a means of sending money from one country to another, but to run your international share of banking, if you wish, to get paid internationally. For businesses, for freelancers, for ex-pats, for people who have just been to countries. So it is another feature with the same characteristics of things that people want us to do for them. “
Undoubtedly, the question that arises is whether TransferWise has any plans to become the de facto banker with a full banking license, further adding to its existing permissions from regulators. Käärmann gives a very strong answer.
“No, we have no plans to apply for a banking license,” he says. “We have not applied for any banking license anywhere in the world … The only thing that gives a banking license in Europe is that banks lend the deposits they give to customers, And not what our customers are asking. They are not asking us, you know, can you lend us your deposit? “
In fact, Käärmann admits to not being a big fan of the dominant current account business model, which he believes serves the interests of banks, not account-holding customers. “I think the way the current account works with banks is not sustainable in the long term. The money we keep in banks is being given for mortgage and business loans and overdrafts, yet the customers who keep that money are not really getting much benefit from it. So why this? “Somewhat rhetoric,” he asks.
Returning to the upcoming investment product – and after I have been a bit more outspoken – he expects the company to have the same transparency as the core money exchange offering, with clear pricing and as hard work for customers as possible. In line with TransferWise’s current modus operandi, I would expect it to be financially sustainable rather than cross-subsidized to pull customers or gain easy headlines, which is common among many investments and savings products.
Adds Transfer Wise CEO: “We want to be clear about what problem we are solving. [It] Comes back to give people a choice of where and how they keep their balance. And this can give you an indication of the product we are manufacturing. I can say now that we are not creating an active trading product, that is not the goal. Our customers are not asking how they can speculate on the markets. There are tools for this, and they are growing fast [getting] Better for this purpose. What we are solving with an investment product will be a more passive way to choose how to sit in your selection. “