“The half-dozen Transferwise investors read like a who’s who of IT venture capitalists.
PayPal founder and Facebook’s first financier Peter Thiel is among them via his Valar Ventures company, as is Xavier Niel, the founder of French communications provider Free.”
Irked by high bank fees on international money transfers, two Estonian IT whizzes who helped engineer Skype and PayPal have hatched Transferwise, a global Internet platform that coordinates currency swaps between individuals.
“Hey, hidden fees. Your secret’s out,” says the Web site, which was founded by Taavet Hinrikus, 32, and partner Kristo Kaarmann, 33.
Transferwise has been giving banks a run for their money since its 2011 launch, even attracting applause from tycoon Richard Branson, who sings its praises as a low-cost business tool for start-ups.
“They are dramatically lowering the cost of transferring money overseas by effectively matching people and companies in different countries who want the opposite currency,” the Virgin billionaire said in a recent blog post.
The marriage of IT ingenuity and financial savvy also garnered a prestigious World Summit Award last year, a UN-backed prize for outstanding Web-based business innovations.
Transferwise offers international money transfers for a fee of just ￡1 (US$1.6) for all transfers under ￡200 and 0.5 percent for everything above — a 10th of what banks typically charge.
At that price, business is booming, with the company processing about ￡1 million per day.
While European rules specify that euro-to-euro transfers must be free of charge, banks fees on international money transfers between currencies range between 3 percent and 6 percent, with exchange rates that routinely favor banks.
The new platform boasts customers from across Europe and is most popular in Britain, France and Spain, mostly among working or retired expatriates, plus small and medium-sized businesses looking to cut operating costs.
It is also eyeing expansion in Asia, Africa and the US, offering services for the Indian rupee, South African rand as well as US, Australian, Hong Kong and Singapore dollars.
Hinrikus was Skype’s director of strategy until 2008, where he joined as the first employee. Kaarmann worked as a consultant for banks with Deloitte and PricewaterhouseCoopers before setting up Transferwise.
The idea took shape when Hinrikus found himself living in London and spending in pounds, but earning euros at his job with Skype at its headquarters in his native Estonia.
Kaarmann, meanwhile was earning pounds in London, but paying a mortgage for his home in the Estonian capital, Tallinn, in euros.
“We found that we had the opposite currency requirements, so we started to exchange it among ourselves at the actual mid-market rate — that’s the exchange rate you see in the papers, not the inflated rate you’ll be offered by your bank,” Hinrikus said.
“Soon we realized we had saved a fortune by not moving the money across borders and that perhaps it could be a big business idea. A few years later Transferwise was born,” he added.
A few algorithms later, they had come up with the programming to connect people with complementary currency needs.
Read More: Taipeitimes