Bye Bye Banks, TransferWise is here!

Wondering why would I say that?

Well it’s not me but the company itself making this tall claim. They support their claim by justifying that their services cost a whopping 85% less than what any global bank would charge for foreign exchange.

So let’s start with what this company is all about,

TransferWise is a peer-to-peer platform for transferring money abroad for a lower cost than currently offered by banks. The company was founded by Taavet Hinrikus (the first employee of Skype) and consultant Kristo Käärmann (formerly of Deloitte and PWC).

This is a service that could totally disrupt the market. Let us know see how it works. Say a user looking to change pounds into euro would log onto TransferWise and state how much money they wanted to exchange.

TransferWise will offer the mid-market rate and take a £1 fee for transactions below £300 and a small percentage of any transactions over that. The exchange relies on there being someone at the other end wanting to change euro into pounds.

Tackling the competitors

With this service, the founders aim to make their company as the Skype of foreign exchange. Their endeavor is to tap into the exorbitant charges levied on customers by premium commercial banks like Lloyds, HSBC, RBS. 98 percent of money transfer is done using the banks so they are the thousand pound gorillas and Transferwise is keen to take a hefty share of this pie.

Target Customers

At present, a full range of currencies is not available and the service is mostly limited to UK, US and European destinations, which means it’s more likely to be used by individuals working abroad who need to transfer money home, international students (or parents, when the students run out of money) and small businesses.

The product is great but, when it comes to launching a new financial service, establishing trust in the brand/product is very essential. This is easily, TransferWise’s biggest challenge ahead. They need to convince people that it’s safe for them to hand over their money, and know that it will arrive safely at the other end. That may involve an expensive marketing strategy, but TransferWise haven’t revealed any details about that yet.

From the looks of it, TransferWise is here to say. It’s a simple and cost-effective solution that improves on the status quo. It’s not only cheaper, it’s also easier to use for the most part. The potential market space is huge and only a small fraction of it is required for the business to scale quickly. As I said, the marketing challenge will be the key.

Check out TransferWise and share your views about this unique venture by commenting below.