Payments market can be viewed as merchant trading onsite or core forex driven remittance payments. TransferWise is focused on the multi-billion-dollar foreign exchange remittances and non-remittance payments. Its intent is a libertarian goal of free flow of money beyond borders addressing the issues of high hidden fees, exchange rates and time taken to effect the payments.
The World Bank reports the global market for remittances was about $580 billion in 2015 and forecast to exceed $700 billion this year, with UK only estimates of $21 billion. TransferWise’s business strategy is built on scaling in volume and value with low margins, recently joined the Billion Dollar Unicorn Club.
Per Transfer Average Amount Comparison:
TransferWise: $2300 WorldRemit, Azimo, or Remitly: $800 - $1200 CurrencyFair: $5000+ JPMC and other banks: $12500 - $7500
Go To Market Strategy:
GTM strategy is to provide a blueprint for delivering a product or service to the end customer, taking into account such factors as pricing and distribution.
“TransferWise’s growth strategy is centered around referral channels. TransferWise’s phone reps stood out in their ability to quickly understand and resolve issues, doing it with some humor.” [Link]
TransferWise is laying new grounds on how to engage customers, in acting as its virtual army of individual PR agents, while giving equal splits to both referrer and the referred customers, as well as testing various referral amounts.
Transferwise has presence in more than 25 countries beyond all of Eurozone with about 35+ currencies it deals in.
Revenue Model and Monetize Customers:
Traditional banks, Western Union and the Money Shop typically charge between 5-8% for transfers, as well as forex and other hidden fees. TransferWise charges a flat commission, ranging from 0.5% in UK to 3% for transfer to Ukraine.
Transferwise has transferred more than $4.5 billion in transactions till now, with a growth of 15%-20% month on month. TransferWise had revenues of $13.8 million with a net loss of $11 million for the year FY 2014-2015. The loss of $11milion on a $14million revenue indicates a burn rate of 25 million dollars per year.
If TransferWise were to gain about 5% of the global remittance market, their annual revenue would exceed GBP 175 million a year (0.5% fee charged on 35 billion).
Total internet driven with no brick-mortar presence, it is not the most efficient/ cost effective transfer mode, but the one amongst the most tech savvy. Open (proprietary) APIs now drive a larger part of its future capabilities, in effect allowing it to be partners of nearly any banking entity across the world..
In the highly competitive, price sensitive USA-to-India corridor, TransferWise ranks a low 7th, thereby be cautious of advertising fees and costs as its USP. This is a market that is headed for a showdown of low fees, nett charges and the trustability factor for the consumer. Stripping in public or such acts can catch eye balls, but to retain customers will be a challenge in the post Brexit, digitally connected fintech world.
Despite the usual risks, TransferWise has already shown that it can be a leader in technology, domain, marketing, branding and is poised well.